Street sign: Shares of rating agencies, Arvind Fashions listing price

Following the default of Infrastructure Leasing & Financial Services, the role of rating agencies has come under the scrutiny of regulators

Investors buy rating agency stocks
 

Shares of rating agencies, which had come under pressure on concerns of a slowdown in business and tighter regulations, seem to be getting back in favour among domestic investors. On Thursday, Reliance Mutual Fund bought Rs 66 crore worth of shares of Icra. The scrip has seen a correction of 20 per cent in the last six months. Earlier, liquidity squeeze in debt markets had stoked fears that fresh bond issuances would significantly drop, slowing down the revenue growth of the rating agencies. Moreover, following the default of Infrastructure Leasing & Financial Services (IL&FS), the role of rating agencies has come under the scrutiny of regulators, which are both reportedly working together to improve the rating standards in India.

Jash Kriplani

Chinks in price discovery armour

Stock exchanges have strict trading guidelines for newly-listed companies. For instance, a stock listing through a demerger, can move only in a 5 per cent band for 10 days. The band is applicable on the price discovered after a 45-minute pre-open session. The framework is aimed at curbing volatility and better price discovery. However, the recent listing of Arvind Fashions, which was demerged from Arvind, has exposed some chinks in the armour. The discovered price for the apparel retailer was less than half its fair value price. As a result, the stock hit 5 per cent upper limit for five straight days post its listing. Real price discovery for the stock will take place once the 10-day price band period gets over, said a broker.

Samie Modak