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Thursday, March 8, 2012

According to the new norms mandated by SEBI for IPOs, investors must note that the shares offered under the IPO on the listing day, would initially go through a pre-open session period which will last for an hour between 9:00 AM and 10:00 AM. During this period, investors would be allowed to punch in orders, modify them and/or cancel them during the first 45 minutes, i.e. upto 9:45 AM. The rationale behind such a move is aimed at protecting the interest of the retail shareholders from artificial price-rigging on the bourses.

However, the crux of the new norms introduced by SEBI states that all the IPO listings on the bourses would be controlled by circuit limits right from the listing day. According to SEBI regulations, in case the equilibrium price (price at which the bid rate matches with the ask rate) is discovered during the pre-open session, the price band for normal trading session shall be 20 per cent of the equilibrium price. In case the equilibrium price is not discovered, then the 20 per cent circuit limit would be applicable on the issue price. While the above mentioned rules are in place for companies with issue sizes in excess of Rs 250 crore, the ones with issue size up to Rs 250 crore would have set circuit limits of 5 per cent either on the equilibrium price or the issue price as stated above

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