Ideally a stock is termed as illiquid if its is not actively traded in the market or has been lying dormant for a long time. In the current scenario in Indian stock market, on one hand when we see a marked improvement in investor interest in shares, on the other hand there is a spike in the number of illiquid stocks in the BSE.The number of listed stocks on BSE is around 7750 while its counterpart NSE has close to 1200 listed stocks. The number of illiquid stocks have risen from 1600 in September 2008 to 1800 in August 2009. On NSE, this number has gone down to 235 from 327 in the same period.
This sudden spurt in the number of illiquid stocks vis-a-vis listed shares does not send a good message about the exchange's business health. It also points out that the difference in listing requirements across exchanges. Is SEBI doing something in this direction to improve turnover and volume? After all a stock if not actively traded for a long time is as good as a privately held company.
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