Finance Friday: India News Digest

Finance Friday is our Weekly News digest that brings you snippets of Buzzing stories in field of Finance & Indian Stock Markets.

BSE launches IPO index to track new listings

The Bombay Stock Exchange (BSE) has launched a new BSE IPO index to track the value of companies for two years after listing on the bourse.

This is one of the first tracking indexes of its kind in India.

The index much on the lines of the famous Dow Jones STOXX IPO index, FTSE Renaissance IPO Index, etc is supposed to aid and better track the performance of new listed companies for a period of 2 years.

Here are some salient features of the BSE IPO index

• For being listed on the index a scrip must have the minimum free-float market capitalization of Rs 100 crore (Rs 1 billion) on its first day of listing
• A minimum of 10 stocks will always be maintained in the index.
• The maximum weight of any scrip would be capped at 20 per cent
• The base date of the index is May 3, 2004, and the base value is 1,000
• 50 stocks chosen initially to be included in the index

Power Sector has the maximum weightage among these scripts with 18.40 percent. The index includes heavyweights like Reliance Power, Power Grid Corporation etc.

It is interesting to note that the timing of the index suggests that BSE is expecting robust growth going forward.

This would boost the number of IPO’s hitting the market and the Index will provide a good benchmark to track the performance of the newly listed companies.

This definitely is an investor friendly move. Infact, the equity markets in India are going through a sea change with various diversifications and better monitoring tools. The announcement for Index Futures was also made sometime back as an additional investment vehicle.

What do you think? Will the BSE IPO index help in tracking the growth of the newly listed companies?

Super Monitor in Offing to ensure Compliance in Stock Markets

Yes, India needs a High Level Watch Dog to ensure that the Indian Capital Markets run smoothly without any manipulation.

The finance ministry is considering a proposal to give statutory powers to the High-Level Co-ordination Committee (HLCC) on capital markets. (source)
This move could transform HLCC it into a super regulator, creating the ground for a single regulator for the entire financial services sector similar to UK’s Financial Services Authority (FSA).

This is especially required to ensure that the interests of small time retail investors are taken car of.

Currently UK, Japan and Ireland are among countries which have an similar umbrella regulator which supervises all financial sectors. The US, on the other hand, has multiple regulators overseeing different parts of the financial services market. India, for that has no such body in place currently.

This is a welcome move, and something that will probably reduce handful of scamsters manipulating the markets.

Friday Jargon Buster: Dumping

Dumping is a slag term for selling a stock without any regard to its price.

It is a practice whereby institutional investors sell large quantities of a security with no regard for the impact this will have on the price. This dumping of stocks in huge volumes can lead to panic in the market.

The particular stock being ‘dumped’ gets hit badly and the retail investors having positions in the stock stand to lose a lot of money.

The causes for “dumping” are not well known but they can be used when the big institutional investors are striped of cash or the stock in question has a negative rating going forward.

In fact, the 2008 market crash can well be attributed to FII’s dumping stocks big time in order to keep the cash handy and reduce their losses. It lead to a selling frenzy and the whole market started tanking.

Wonder if SEBI should introduce a certain circuit breaker kind of concept in case of big “Dumping” in a particular stock. It will at least safeguard the interests of the retail investor.

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Author: Arun Prabhudesai

Arun Prabhudesai is founder / chief editor at trak.in. He jumped the Entrepreneurship bandwagon in early 2008 after a long 13 year stint in I.T Industry. You can follow him on twitter @trakin or get in touch with him at admin-at-trak-dot-in or 91.9822575676.

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