Starting this Saturday, the top 100 listed companies by market capitalisation in India will be required to confirm or deny any market rumour reported in the mainstream media. The Securities and Exchange Board of India (SEBI) has mandated that these companies must respond to any specific material event rumour within 24 hours of its reporting. The rule will extend to the top 250 companies from December 1.

SEBI's new framework aims to prevent the dissemination of information that could influence a company's valuation during corporate actions. This initiative seeks to strengthen the rumour verification process and enhance transparency in the market.

According to Makarand M Joshi, founder of MMJC and Associates, a corporate compliance firm, "The move would dissuade leaking of information that would affect the valuation in the given corporation action. This initiative of SEBI would help strengthen the rumour verification framework. It would help in achieving a fair market thereby making it a preferred market for investors all over the world."

Under this framework, SEBI has excluded price volatility when determining the average market price for various corporate actions. This includes buybacks through book building, buybacks through stock exchange, qualified institutional placements, preferential allotments, and takeovers. The exclusion ensures that the price calculation is not skewed by temporary price movements caused by confirmed rumours.

Market rumours, which can range from news about top management changes to cancellations of orders and financial health concerns, often lead to significant stock price fluctuations. Trivesh, Chief Operating Officer of Tradejini, explained, "SEBI's framework addresses this issue by establishing a mechanism to determine the unaffected price—the price of a stock before the rumour surfaced. This price would be used for transactions unless the rumour itself caused price fluctuations in subsequent trading days."

The new rule is expected to create a fairer market environment by reducing speculation and ensuring that investors have access to accurate information. SEBI's initiative aligns with its goal to protect the interests of investors and maintain the integrity of the Indian stock market.

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