Concerned over possible price manipulation in stocks on their first day of trade, market watchdog Sebi is considering greater surveillance and preventive measures such as a demand-driven price discovery.
An internal consultation process is already underway on this front after several complaints were received by Sebi recently regarding huge price fluctuations on the first-day trading, a senior official said.
The problem is more acute for stocks of the companies that list themselves pursuant to activities like de-mergers, relisting after revocation of earlier listing, suspension or capital restructuring, and not after initial public offers (IPOs), the official added.
The stocks that get listed on the bourses after an IPO have a reference point for commencement of trading in their public issue price, but there is virtually no such benchmark for pricing of scrips in non-IPO listings, thus leaving room for possible price manipulation.
At the same time, the watchdog is also looking to beef up its own 'integrated market surveillance system' as well as the surveillance systems of the stock exchanges for faster identification of any possible price-rigging cases.
Another senior official privy to the matter said, Sebi is currently investigating whether there was any price rigging in the case of Emami Infrastructure last week, as there was wild fluctuation in the share price movement with massive volume on its first-trading day. Adding to the suspicion, there was a massive difference between the prices of the scrip on the BSE and the NSE -- in the early morning trade on July 28, when it got relisted pursuant to its demerger from the already-listed FMCG major Emami, the official added.
The stock opened at close to Rs 600 a share on the NSE, but tanked to a low Rs 86, a fall of over 85 per cent,in about an hour's time. But on the BSE, the stock opened at Rs 250 and sniffed at Rs 300, before falling to a low of Rs 86--the same intra-day low on the NSE.
While there is a mechanism that prevents any rise or fall of over 20 per cent in a single day in most of the stocks, the exceptions being mostly large-cap stocks and those where derivatives trade also happen, such price circuits are not imposed on the first-day of trade. It's only after monitoring the movement of the stocks, the authorities determine whether to impose a circuit of 5 per cent, 10 per cent or 20 per cent.