The National Stock Exchange of India Ltd. (NSE) has announced a significant regulatory change aimed at standardizing the price discovery mechanism for Initial Public Offers (IPOs) on the SME platform. This article delves into the details of this new measure, its implications, both positive and negative, and the reasons behind its implementation.
As per the latest circular dated July 4, 2024, the NSE has introduced an overall capping of 90% on the Opening Price/Equilibrium Price discovered during the Special Pre-Open session for IPOs on the NSE Emerge (SME) platform. This price control cap is specifically designed for the SME segment and will not affect Mainboard IPOs, Relisted Securities, or Public Debt.
The introduction of the 90% price cap has sparked mixed reactions from market participants:
The primary reason behind this regulatory change is to address the issue of price volatility during the initial trading hours of SME IPOs. The SME market is often characterized by lower liquidity and higher volatility compared to the Mainboard, making it susceptible to significant price swings. By implementing a 90% cap, the NSE aims to:
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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