Sebi did well to order the impounding of Nissan Copper trades following evidence of market manipulation as soon as it was listed. Nissan Copper's share price had soared from an opening at Rs 40 (close to the offer price of Rs 39) to a high of Rs 137 on listing on December 29; the volume was over ten times its capital. The shares were shifted to the trade-for-trade category when the scrip rose 20 per cent to hit the upper circuit on the second day after Sebi's investigation began. The regulator will also probe a large block deal at over thrice the offer price, which occurred that day. While Sebi acted swiftly, there is an interesting twist to the issue. The self-styled Citizens Action Forum claims to have written several letters warning the regulator about the company and its promoters, well before the IPO was cleared. Copies of these letters have been acknowledged by Sebi, but its primary market department did not get any investor complaint. Sebi's mechanism for sorting correspondence needs to be fixed to ensure it hears market intelligence and it reaches the right department to ensure action.

Investor beware

There are new developments on IPOs that were graded by credit rating agencies as part of a 12-company pilot project. Investors would recall most of these were small companies that got a poor rating of one or two out of five; only one — JAS toll roads — got a three point grade. Minar International, the first to be rated, dropped its IPO after getting a poor grade. But Shree Ashtavinayak Cinevision, which had the same grade, sailed through with a 6.6 time over subscription. Consequently, all other companies with a poor IPO grade are now renewing their IPO plans. We learn institutional investors stayed away from Ashtavinayak, as their internal compliance rules would need fund managers to justify investment in poorly-rated IPOs. The entire subscription seems to have come from retail and high networth individuals. Does this mean that these investors are all a bunch of gamblers? The real truth will be known only if Sebi learns any lessons from the Nissan Copper case.

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