Following a draft proposal released in April, India’s market regulator SEBI recently finalised a market reform aimed at enhancing price discovery and liquidity for the nearly 70 holding companies listed on the country’s stock exchanges.
Under the new regime, the exchanges will hold annual “special call auctions” for the stocks of companies that hold at least 50% of their assets in the form of shares in other listed companies. The main feature of the special call auctions is that they will not have price limits, in contrast to regular trades on the exchanges. They should therefore have the greatest impact on names that are stuck at very low prices due to a lack of trading volume.
The announcement resulted in improved market sentiment towards the whole sector.