Material Price Movement frame work decoded

This article covers a crucial question that only NSE and BSE have answered just a few days back through their circular 431/2024.

As per first proviso of regulation 30(11), A listed entity shall confirm, deny or clarify upon the material price movement as may be specified by the stock exchanges any reported event or information in the mainstream media…

Hence the trigger for market rumour verification is the material price movement.

Just on a side note, my notes on amendments on regulation 30(11) of SEBI LODR Amendment Regulations 2024 are also covered in the end.

Before Practical calculation of material price movement, we need to understand few concepts given in NSE and BSE circulars:

1.Price benchmarking:

• For NSE: Nifty 50 Index
• For BSE: Sensex Index
• Benchmarking shall be done at the start of the day (i.e. at 9.30 am) :15 mins interval (9.15 am-9.30 am).

2. Intraday Price movement:

• In case of intra day price movement (I.e. after 9.30 am0, only the price range-based variation shall be considered irrespective of index movement.

3. Percentage variation calculation:

4. Trigger: Rumour should have direct relation with price movement.

The price of security should move in same direction as the nature of rumour.

i.e. positive news ∝ positive material price movement.

Negative rumour ∝ negative material price movement.

Else no need for confirmation of rumour by Listed entity.

5.Combination of factors:

In case of material price movement caused due to a variety of factors (announcements/ other events) including rumours, it would be deemed to be attributed to rumour.

6.Response:

Give response within 24 hours under announcement module on online platform of exchange.

7.Queries:

In case of any further queries, Listed Entities can connect on [email protected].

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So Now once we are clear with the basics let us move to the real framework of material price movement:

There could be two Practical scenarios:

Yes, you guessed it right!

The first scenario is in case of Positive News like the above!

In case of positive Rumours, The framework is:-

However let us understand the same with all possible real life scenarios:

Price of share: RS 1,407.00

News: Hypothetical example, the company Twitter now known as X is considering to appoint Mr Elon Musk, an industry veteran as it’s next CEO. (Well, I still doubt if it is a good news but assuming it is a good news)

Well Now what could be the second scenario:

Yes, it is about negative market rumours:

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So the framework for negative rumours is exactly opposite:

Now lets dive into all possible scenarios for negative news in real markets:

Share price: Rs 149

News: If any research report is released Like below

Along with this, as promised the SEBI LODR Reg 30(11) notes from my book:

For more such Notes, you can join our WhatsApp Community channel:

https://chat.whatsapp.com/G289z3tB3xF9BrylfSiPJN

Footnotes:

1.https://sebi.gov.in/

2.https://www.nseindia.com/

3.https://www.bseindia.com/

4.Consultation paper on SEBI LODR regulations

5.SEBI LODR Regulations 2015

6.SEBI LODR amendment Regulations 2024

Credits:

Special thanks to Mrunal, Juhi, Kalika and Priyanka for helping me clear my silly doubts.