If you are an investor or take a keen interest in the stock market, you would have witnessed sudden rise or decline in the stock prices of a company. This is mainly due to rumours which leads to panic buying or selling by investors. Taking note of this, SEBI announced a new guideline on May 21, 2024 to address the impact of rumours on stock markets and introduced the concept of ‘Unaffected Price’.
Read to understand the concept of Unaffected Price, how these guidelines can ensure stability in the markets and also how these regulations will protect investor interests.
Understanding the Concept of Unaffected Price
In simple terms, if a stock is experiencing volatility due to rumours and speculations, then for a particular period that stock can only be traded at a specific price. This price is the same as it was before the rumour spread.
For example, if there is a rumour about a company’s merger and it subsequently issues rights shares, the Unaffected Price ensures that the price of the rights issue is not influenced by the rumour.
The new rule by SEBI will ensure prevention of volatility in stock prices due to rumours. At the same time, it also ensures that investors are able to make decisions based on reliable information.
However, from June 1, 2024 this rule will cover only the top 100 companies and later on from December 1, 2024 the remaining 150 companies will be covered under the rule.
SEBI’s Steps to Curb Rumours
SEBI has taken steps to stop rumours and protect the interests of investors. These include:
Introduction of Unaffected Price Rule: Under this rule, if a company’s stock price fluctuates more than 5% due to rumours, its stock will be traded at the unaffected price for the next 24 hours. The unaffected price will apply for either 60 or 180 days depending on the transaction stage, and until the ‘relevant date’ as per the current regulations.
Quick Information Dissemination: The company has to clear out the rumours quickly via a press release and also update the information on SEBI’s website.
Strict Supervision: SEBI continuously monitors the stock prices to keep a check on suspicious activities.
Stringent Penalties: SEBI imposes strict penalties on companies that take advantage of rumours and disrupt the market.
Implications of these SEBI Guidelines
These norms will address price disruptions due to rumours and ensure a transparent and efficient functioning of stock markets. Furthermore, these guidelines will promote informed decision-making and allow investors to better manage their investments.
What’s Next?
SEBI is continuously working to ensure a stable and transparent market for investors. Although it is impossible to completely eliminate the impact of rumours, the new guidelines are expected to significantly reduce such instances and help investors make informed decisions. It is absolutely essential for investors to conduct thorough market research and seek the advice of a financial expert before making any investment decision.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
