The Securities and Exchange Board of India, SEBI the guardian for Investors across the board in Capital markets in India has devised & designed a severely flawed Offer For Sale [OFS] regulation against the Retail Indian Investors. On the very face of it you will probably think the author of this Article is Insane, but ask yourself how many shares did you get allotted in the recently concluded Power Finance Corporation OFS by the Government of India ?
The Govt of India to maximize its returns stopped announcing the OFS in advance as speculators would drive down the prices and also make a killing by virtue of their trades in F&O segment. So Govt made a smart move to only announce the OFS after closing of Friday’s trading that the Offer will happen on Monday. Retailers would be allotted only 20% of the Issue at a so called discount of 5%.
Before PFC OFS of July-2015, Retailers had to place priced bids with no cut-off provision. However, in the recent PFC OFS they introduced “Cut-Off” for retailers as well but of no use.
How Retail Investors Were Left Out in Lurch Because of SEBI’s Flawed Regulation
Smart Traders started shorting the stock in Cash, F&O on Monday as the floor price was lower at Rs 254 than the closing price of Rs 261 on Friday. When the OFS opened, Traders bid in the High band upto 2 Lakh for Retail Category to drive the price to Rs 261.90 as the Cut-Off as they would get the shares allotted at Rs 248.80. “Most retail investors suffered as they bid at the cut-off price, which was close to the cash market price and got zero allotment,” says Sudarshan Roongta.
Are SEBI Regulators of so low level IQ that they couldn’t enforce the following ?
1. Ban in F&O Segment until the OFS was concluded ?
2. Only Cash Market Transactions to be allowed, still stricter norm like Trade For Trade would have ensured lesser manipulation in the prices
Both of these options are very much in front of the eyes of the SEBI but they probably don’t want Retailers to own piece of the Indian PSU. With the expose of massive Scam in Algorithm Trading on National Stock Exchange & SEBI turning a blind eye towards the same, it is high time the Union Minister of Finance intervenes and sets the rules right. But does the system really care about Retail Indian Investors ?