SEBI's withholding of Vaswani Industries' listing and the withdrawal of Galaxy Surfactants Ltd's IPO could just be the start of bad tidings for the primary market, say marketmen.

All the companies that were listed in calendar year 2011 are trading below their listing price (with the exception of Lovable Lingerie and Sudar Garments). In 2011, 40 companies have filed their offer documents and the only issue that is through is that of Power Finance Corporation.

The SEBI, on receiving complaints that there were irregularities in the subscription process of Vaswani Industries, has withheld the listing of the company in an instruction to the stock exchanges. However, the regulator has not yet issued summons to the accused parties, said a person associated with the issue.

“SEBI must investigate all those mid-cap, small-cap stocks that have been listed in the last 12 months, especially those where the QIB response was tepid,” said Mr Arun Kejriwal, Founder of KRIS Research. “Investigations should be done on whether there was a pattern involved in subscription to such IPOs.”

Experts said that the activities of the book running lead manager in such cases should be taken note of and also the percentage of shares delivered on the day of listing.

There have been cases of heavy volumes being logged in the first couple of days of listing of a stock, followed by a dramatic fall in trades.

The stock market was apprehensive of the Galaxy Surfactants IPO because there was a feeling that it was aggressively priced. Late on Wednesday — the closing date for QIB subscriptions — the issue was withdrawn following poor response from all investor segments.

The QIB book was subscribed only 0.59 times.

“With many IPOs not showing the performance expected after listing, long-term investors are waiting and watching before entering any stock,” said Mr Prakash Diwan, Head-Institutional Equities Networth Stock Broking.

“Due to the huge proliferation of the F&O segment, it is unfortunate that investment horizons have shrunk and transformed into trading horizons.”

People are misusing the absence of circuit filters applicable on a stock on its day of listing to aid price discovery, said experts.

“Better enforcement in the secondary market has led to operators misusing the IPO process as this is the only window left for manipulating stock prices,” said a head of research of a brokerage.

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