The gap between the closure of an initial public offer (IPO) and its listing may be reduced to between three and five days from the current 21 days.
The proposal, which will be one of the biggest capital market reforms in recent years if it is implemented, has been made by a Group on the Review of Issue Process (GRIP), which is likely to submit a report today or tomorrow.
GRIP is a sub-committee of the stock market regulator’s Primary Market Advisory Committee (PMAC), which meets Monday to consider the report. The report will be put up for public comment by the Securities and Exchange Board of India (Sebi) after that.
The decision to reduce the IPO closure and listing period was announced by the new Sebi Chairman C B Bhave after the regulator's board meeting in New Delhi yesterday.
Sources close to the developments said Sebi was also considering changing the price discovery, bidding and allotment process to eliminate grey market operations and having investor money locked up without interest payments for almost a month.
Since these reforms will require a smoothly functioning electronic market in which everything from applications to payments will be in e-mode, the broad proposal is to introduce the changes in phases.
In the first phase, applications will be allowed in both electronic and physical formats and the time gap between issue closure and listing kept to seven days.
The three-day process could be considered once sufficient experience has been gained on electronic applications.
"Large IPOs attract many first-time investors who are not necessarily skilled and technology-savvy. For these people we still have to provide an alternative mechanism," said the source.
As part of the exercise, the information required in the application form may be pared to the bare minimum like the Permanent Account Number or unique identification number issued by the Association of Mutual Funds of India.
Data like the applicant’s father’s name and address will be scrapped since a good deal of investor data are already available electronically.
The reduction in the time gap between issue closure and listing will address one of Sebi’s major concerns that promoters artificially boost demand in the grey market ahead of an IPO listing.
Promoters typically take advantage of the time gap between closure and listing to put in bids in the grey market through. Many brokers also take independent positions on stocks and charge clients a premium for doing so.
Shortening the time gap will also impact institutional investors who may have to pay the entire amount upfront along with their applications, like retail investors do now, against 10 per cent currently.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
No comments:
Post a Comment