Street Signs: Easing the IPO fervor, Long road to mkt hour extension, more

Regulatory clampdown: Easing the IPO fervour

The regulatory actions taken by the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India are expected to temper the frenzy observed in the initial public offering (IPO) market. Market operators have become cautious, and grey market activity has slowed in anticipation of regulatory scrutiny. “Several issues were artificially boosted, especially on the small and midsize enterprise side. The strategy involved attracting investors by showcasing large grey market premiums. The upside is that only genuine issues will receive favourable reception,” remarked an industry insider.

Beyond the bell: Long road to market hour extension

The Brokers’ Industry Standards Forum (ISF) is confronted with the formidable task of uniting a divided house on the matter of extending market hours. While the Association of National Exchanges Members of India has given its approval to the proposal, the Bombay Stock Exchange Brokers’ Forum (BBF) is hesitant about keeping the derivatives market open for an additional three hours. BBF was expected to submit its views on the extension of trading hours by the end of February. Despite numerous meetings, the confirmation of the plan remains pending. Concerns among traditional brokers persist, revolving around increased costs and challenges in system capability. Unifying both associations on a common front represents a big challenge for the newly constituted ISF, which comprises representatives from each entity and is tasked with building consensus on key issues impacting the industry.

Defying gravity: The rise of the equal weight index

Although the National Stock Exchange Nifty50 is a leading benchmark for exchange-traded funds (ETFs), the underperformance of heavyweights such as HDFC Bank, ITC, and Infosys has impacted the index’s performance over the past year. Nevertheless, a modified version of the index, the Nifty50 Equal Weight, which assigns equal weighting to each component regardless of their public float, has yielded impressive returns. The Nifty Equal Weight has surged 44 per cent over the past year, outperforming the Nifty50’s 27 per cent gain. ETFs linked to the equal weight index are becoming increasingly popular. Experts note that the equal weight index thrives during broad market participation but tends to lag when select stocks dominate the market. This pattern was observed with the US S&P 500, where the index climbed 30 per cent in one year, while its equal-weight counterpart rose only 15 per cent.

(Contributed by SUNDAR SETHURAMAN, KHUSHBOO TIWARI & SAMIE MODAK)