IPO to provide ‘Safety net Guarantee’ and ‘Tax incentive’

August 15, 2012   ·   0 Comments


The Securities and Exchange Board of India (Sebi) will consider this week wide-ranging reforms in its regulations for mutual funds and initial public offers (IPOs), including a ‘safety net’ guarantee and tax incentives for new investors. This has been certainly one of the biggest news in the market right now.
Reforms for Market


  • Various proposals expected to be discussed and approved at SEBI’s upcoming board meeting on August 16 also include introduction of e-IPO, which would allow investors to bid for IPO shares electronically and without any physical paperwork.


  • The key proposals for reforms in primary market include introduction of a ‘safety net’ guarantee for investors buying shares through IPOs. As per the proposed mechanism, a certain portion of the investment made by retail shareholders in the IPOs could be guaranteed for a fixed period, which could be for six months, even if the shares’ value plunges below the IPO allotment price during this time.


  • Raising allotment for Retail Investors.


Read: How to pick an IPO?

Cons of the new IPO Norms


It will be certainly one of its kind where SEBI is trying to regulate the unregulatable  price of a stock for not a day or two but for 6 months. Though nothing firmly is known to the investors, but it would be really interesting to see how SEBI try to achieve it.


This goes against any grain of equity market investing. Investing for a fixed 6 months time period is never going to make anything better for equity markets.

People will come in and dump the stocks in six months again never becoming a long term investor.


SEBI will generate lot of traders who will like to park their money for 6 months if the Idea goes through. Though it will never be able to resolve the issue in it.


SEBI should be strigent in the guidelines for fixing an IPO price for a company and with the merchant bankers which advises them on the IPO price. None the less, IPO market is getting something new, one of its kind which time will predict how good or bad it pans out for market and for investors in India.


Tell us your views on the new norms which SEBI has envisaged for reviving the IPO market. I would love to hear them.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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