New Document top_band
 
Business Standard

New Sebi norms reduce listing-day volatility

Related News

Listing-day restrictions introduced recently by the Securities and Exchange Board of India (Sebi) have significantly reduced by curbing speculative trades.

According to an analysis, the average fluctuation in share prices (difference between the highest and lowest prices on the day of listing) for companies that got listed last year was a little more than 100 per cent. The new rules have significantly reduced such volatility. While and , which got listed last week, moved within a range of just five per cent, shares of , which got listed in March, moved in a band of 11 per cent on listing day.

Said , executive director, , “Since only delivery-based trades are allowed in smaller issues, volume and volatility will automatically come down as speculators won’t be able to participate.”

Added , strategist and head of research at SMC Global Securities, “It’s not just about the rules but also the quality of the issues and the pricing. Most companies that have entered the market after this year have been good quality issues, unlike last year, when we saw a lot of dubious companies get listed.”

In January, Sebi had put in place a tight framework to curb the high volatility and price movements observed on the first day of trading.

Many small-sized companies that were listed last year had seen unprecedented price fluctuations in the first few days of trading. For instance, Indo Thai Securities, which got listed on November 2, saw its share price move between Rs 18 and Rs 99 on the first day of trading.

However, in what could be a negative for brokerages and stock exchanges, the new rules have significantly impacted first-day trading volumes. Broking houses and exchanges generate revenues from trading activity.

The two initial public offerings (IPOs) that made their stock market debut last week saw a first-day trading volume of just a fraction of the issue size. Before the new rules came into play, companies making their debut clocked an average turnover of four-five times the issue size.

According to market participants, Sebi’s move to allow only ‘delivery-based trades’ for issues of less than Rs 250 crore for the first 10 days after listing, is the main reason for the thin trading volumes.

Both NBCC and MT Educare clocked an unusually low trading turnover of Rs 21 crore each on both exchanges combined, just a fifth of their issue size. Some companies that got listed last year, including Indo Thai, Sanghvi Forging and Rushil Decor, had seen first-day volumes of more than 15 times their issue size.

Under the new norms, the regulator has extended the pre-open call auction window to IPO companies for arriving at an ‘equilibrium price’. Further, it has introduced tight circuit filters of five per cent or 20 per cent, depending on the issue size.

Read more on:   
|
|
|
|
|
|
|
|

Read More

Axis Bank: Concerns reflect in valuations

Axis Bank posted good set of numbers for the quarter ended 31st March 2012, beating the consensus estimates. Higher than expected growth in interest ...

Quick Links

 

Market News

Today's picks

Nifty, Bank Nifty, HCL Tech, Coal India & Tata Steel

Markets fall to 1-week closing low

The BSE Sensex and Nifty fell on Monday to their lowest close in a week, as profit-taking hit shares of blue-chips such as ICICI Bank for a ...

Centre reduces insurance premium on cotton crop to 6%

The new premium is applicable to all cotton-growing farmers across the country with immediate effect

Moody's to upgrade ratings of Tata Steel, British arm

Review upgrade has been triggered by issuance of $1.5 bn worth bonds by ABJA Investment, guaranteed by Tata Steel

Sebi confirms curbs on Khoday India

The watchdog had imposed curbs on the company for not achieving the minimum 25% public holding within the June 3 deadline

Back to Top