Madhabi Puri Buch, the head of the Securities and Exchange Board of India (SEBI), recently highlighted concerns over potential irregularities observed within the Small and Medium Enterprises (SME) segment. During a public event, Buch acknowledged the presence of certain red flags hinting at market manipulation, sparking reactions within the financial community.
Market Reaction
In response to Buch’s statements, the S&P BSE SME IPO index experienced a notable downturn, shedding 2.3 per cent and settling at 56017.74. This downturn was particularly pronounced in shares of companies such as Resgen, Pace E-Commerce Ventures, Navoday Enterprises, Captain Technocast, Kahan Packaging, and AA Plus Tradelink, witnessing declines ranging between 6 to 14 per cent.
SEBI’s Vigilance and Proposed Actions
Buch underscored SEBI’s vigilant stance in monitoring potential instances of price manipulation, especially concerning SME IPOs. The regulatory body is actively gathering comprehensive evidence and feedback to initiate appropriate measures against any malpractice. Furthermore, SEBI is contemplating introducing enhanced disclosures for SME IPOs to ensure transparency and maintain market integrity.
Market Dynamics and Regulatory Adjustments
The SME sector has experienced a surge in public offerings in recent times, attracting significant interest from various investor segments. However, in light of emerging concerns regarding market integrity, SEBI extended its surveillance mechanisms to include SME stocks under the trade-for-trade settlement framework and additional surveillance measures (ASM) from October 3 onwards. These measures are aimed at fortifying market safeguards and fostering fair trading practices.
Also read: Sumeet Mehta Urges SMEs to Seize IPO Boom, Closing a Rs. 25 Lakh Crore Funding Gap
Addressing Market Volatility
Additionally, Buch voiced apprehensions regarding the valuation levels of small- and mid-cap stocks. She also expressed concerns about substantial inflows into mutual funds targeting these segments. In response, SEBI has urged asset management companies to develop comprehensive frameworks. The aim is to manage these risks effectively, ensuring market stability amid evolving dynamics.