Know about classification before investing in stocks

CLASSROOM

Before one invests in shares one should clearly understand in which group the share has been classified. The stocks have been grouped under various classifications for ease of understanding by investors and the common man.
Stocks have been classified depending on various factors and criteria such as market value, scope of trade, track record, profit, profit share, share ratio, and corporate steps.

Both the NSE and the BSE use similar classification criteria. How BSE classifies companies into A, B, S, T, T2T and Z groups is what is described here. Familiarisation with these groups will help investors in choosing which shares to invest in.

The shares in group A have the most commercial value and can be easily bought and sold. As a result, investment and trading is technically easy in such shares.
To be included in Group A commercial value is a major criterion. These are the companies that bring out the working report on time as well as reveal results as and when required.

Most of the fund managers buy only shares in Group A. This leads to the increased volume of trade in this group because of the participation of investing institutions. The concept is that generally Group A shares have better performance in the stock market. Even though the stock exchange doesn’t take into account the basic factors or value companies with poor track record are not included in Group A.

But there is no guarantee to believe that all shares in Group A are worth investing in. Decision can be made regarding investment in Group A shares only after studying the performance of each company.

Small companies are included in S group. Generally, companies with less than Rs.5 crore turnover are considered at small companies. The volume of trade in such companies are low.

Intra-day trading can’t be done in shares included in T2T group. Trading is carried out only after a certain margin money is given in intraday trading. The shares included in the T2T group can be bought only after remitting the whole amount. It is to avoid speculative trading leading to huge price fluctuations in the market that shares in this group are not included in intraday trading.

Shares of companies that don’t publish working reports and not enough data needed for basic listing criteria are included in Z group.

Those shares that don’t belong to any of the above groups are included in B group. The volume of trading in these shares are normal.