Guidelines issued by Sebi to combat market rumours

Listed companies must confirm, deny, or clarify any media-reported information that causes significant price movement in their shares. Stock exchanges will provide a framework for identifying these material price movements.

The rule will be implemented in phases, starting with the top 100 listed companies by market value on June 1, followed by the next 150 entities on December 1.

If a company confirms such news within 24 hours, the effect of this news on stock prices will be excluded from the volume-weighted average price (VWAP) calculation, which averages prices over a period considering traded volume. Sebi has introduced the “unaffected price” for these calculations.

When rumours leak before a formal company announcement, stock prices can surge or plunge, affecting the VWAP used for transactions like fresh share offerings. Sebi’s new rule aims to exclude this false inflation or deflation.

The unaffected price represents the share price without the rumour’s influence and will be used from the start of the material price movement until slightly beyond the rumour’s confirmation. This can be applied for up to 60 or 180 days, depending on the transaction stage, from confirmation to the relevant date under existing regulations.