Delving into the Notices page of BSE or NSE reveals a list of companies transferred to the T2T segment, a move aimed at curbing speculation. Let’s unravel the complexities surrounding T2T stocks.
Criteria for T2T Transfer
Understanding the parameters guiding the shift to T2T is crucial. Only stocks absent from F&O trading are considered. Transfers occur fortnightly or quarterly, based on criteria like P/E overvaluation, price variation, and market capitalization.
P/E Overvaluation
When Sensex P/E is 15-20 and a stock’s P/E exceeds 30, it’s considered for T2T. The trailing EPS of the last four quarters is pivotal in this assessment.
Read: Understanding Earning Yields and P/E Ratio
Price Variation
If a stock’s price swings 25% more than Sensex or its benchmarked sectoral index, it’s a candidate for T2T, provided the variation aligns with the Sensex direction.
Market Capitalization
Stocks with a market cap below Rs.500 crore face T2T consideration. The goal is to curb speculation in smaller stocks vulnerable to manipulation.
Shift Dynamics
Quarterly assessments determine if a stock moves from T2T to the normal segment, emphasizing a dynamic review process.
T2T Trading Essentials
Understanding T2T trading involves recognizing that only delivery trades are allowed. Intraday squaring isn’t permitted, shaping the following key aspects:
- Compulsory Delivery on Purchase: Buying a T2T stock mandates taking delivery by the end of the day. Failure results in selling by the broker on T+2, with potential penalties.
- Delivery Check on Sale: Selling a T2T stock requires having delivery in your demat account. You can’t buy it back the same day, and failure to deliver prompts auctioning with potential large losses.
- No Intraday Trading: T2T stocks prohibit intraday trading, offering no room for covering positions once a trade is executed.
- No Scope for BTST/STBT Trades: Unlike common industry practices, T2T stocks eliminate the possibility of Buy Today Sell Tomorrow (BTST) or Sell Today Buy Tomorrow (STBT) trades.
- T2T vs. Z-group Stocks: T2T stocks, while delivery-based like Z-group stocks, differ as they comply with listing agreements, making them a more reliable option.
Circuit Filters in T2T Stocks
When a stock transitions to the T2T segment, circuit filters are set at ±5%, ensuring automatic volatility control within this range.
Additional Insights
As of December 12, 2023, the T list comprises a total of 270 stocks. The fundamental implication is that the stocks included in this list should not exhibit a deviation beyond 5% in either direction.
Conclusion
Understanding the dynamics of T2T stocks is crucial for investors navigating the market. As a delivery-centric segment, T2T trading demands adherence to specific rules, offering a unique perspective on market dynamics and risk management.
