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The National Stock Exchange (NSE) has announced a notable update to its trading parameters, effective June 10, 2024. Under this change, all stocks priced below Rs. 250 per share will adopt a one paisa tick size, as outlined in a circular dated May 24, 2024.
The existing tick size for stocks traded on NSE is 5 paisa. With this move, the buyers and sellers can place orders for stock of less than Rs. 250 in multiples of 1 paisa. The Bombay Stock Exchange (BSE), a competitor of NSE, already has a 1 paisa ticket size, but for a stock price of less than Rs. 100.
NSE's Ticket Size Change: Analysts' Perspectives
Analysts contend that reducing the tick size, particularly for lower-valued shares, facilitates more accurate price discovery in the market. Kranti Bathini, Director of Equity WealthMills Securities, says it is a welcome step from the NSE. Lower tick size will help improve the spreads, and the volumes too can rise.
Arvinder Singh Nanda, Senior Vice President at Master Capital Services, highlighted that NSE's decision to reduce the tick size aims to enhance price discovery and market efficiency, making trading more attractive for both retail investors and traders.
He also noted that aligning tick sizes in the stock futures segment with those in the cash market will enable investors to develop new strategies tailored to smaller price increments, especially for lower-priced securities.
However, Nanda cautioned that this adjustment could potentially increase system load due to the higher volume of orders. While Anand James, Chief Market Strategist at Geojit Financial Services, suggests that reducing the tick size could enhance quote tightness, particularly for lower-priced stocks.
Adapting to New Ticket Size Norms
The new tick size rule on the NSE will take effect from June 10 for the cash segment and from July 08 for the stock futures segment.
NSE shall review the closing price of the underlying security on the last trading day of every month to decide the tick size.
In case of a corporate action such as a bonus, stock split, dividend or rights issue, the existing tick size will continue for the stock till the time of the monthly review, post which it may be revised if need be.
As of 24 May 2024, nearly 50 per cent of the NSE stock quoted below Rs 250 per share. Out of a total of 2,749 stocks traded on Friday, 1,381 had closed below the Rs 250 threshold. On the same day, out of 4,290 stocks traded on the BSE, 1,935 were quoted below the Rs 100 mark.
NSE is the largest stock exchange in India in terms of trading volume, with overall market capitalization exceeding $4.79 trillion. NSE has added over 120 million investors in the five years between 2019 and 2023. In January 2024 alone, more than 5.4 million investors were registered. It operates under the regulatory framework of SEBI and offers a wide range of products, including equities, derivatives, debt instruments, ETFs (Exchange-Traded Funds), and mutual funds.
How Can You Buy And Sell NSE Shares?
The NSE stock price has skyrocketed since last year from Rs 3600 to Rs 6000 per share. This surge comes near the announcement of financial results for FY 23-24, which led to an increase in trading activity of the share. The average daily volumes and healthy financials suggest a strong positive sentiment in the eyes of investors. After declaring a 4:1 bonus, the NSE share price now trades around Rs 1200.
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