Sebi issues guidelines to manage stock impact from market rumours

At close, the Sensex was down 52.63 points or 0.07 percent at 73,953.31, and the Nifty was up 27 points or 0.12 percent at 22,529.

Stock market regulator Sebi has issued fresh guidelines to manage the stock market impact arising out of market rumours, according to a circular dated May 21. The purpose is to exclude price disruption caused by rumours while arriving at the price for an acquisition.

Staggered Implementation

The regulations shall be applicable to the top 100 listed entities with effect from June 1, and on the next 150 entities starting December 2024.

What The Regulation Says

The regulation requires the listed entity to verify market rumours once there has been a material price movement. In this regard, the Sebi circular states, "unaffected price shall be considered for transactions on which pricing norms specified by SEBI or the stock exchanges are applicable, provided the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement."

What is Unaffected Price

Unaffected price here implies the share price level that would've existed if there was no rumour in the market.

Framework for Unaffected Price 

The calculation of adjusted volume weighted average price (“VWAP”) to
consider unaffected price is as follows:

• Daily WAP variation from the day of material price movement till the end of the next trading day after confirmation of rumour to be attributed to the rumour.
• The adjusted daily WAP is to be calculated by excluding the WAP variation from the daily WAP in from the day of the material price movement onwards.

The circular is expected to help transacting parties from price volatility arising due to market rumours.