NSE imposes 20% lower price cap for SME IPO pre-open session from August 4

The National Stock Exchange of India (NSE) on Wednesday, July 30, said that it will introduce a lower price cap of 20% below the issue price for SME initial public offerings (IPOs) during the special pre-open season. This will come into effect on August 4, the exchange said. 

This came after the earlier circular issued on July 4, 2024, when NSE had introduced an upper cap of 90% over the issue price during the special pre-open session for Small and Medium Enterprises IPOs.

"To standardize the opening price discovery/equilibrium price during the special pre-open session across exchanges, exchange (NSE) is introducing a floor (lower band) of 20 per cent below the issue price during the special pre-open session for SME IPOs," the NSE said in a circular.

The special pre-open session is a short period before regular trading hours, designed to determine the opening price of stocks and reduce volatility at the start. Accordingly, the special pre-open session for SME IPOs on the NSE Emerge platform will have an upper band of 90% over the issue price and a lower band of 20% below the issue price, NSE said in a circular on July 30. 

This means that the stock can only open between 20% below and 90% above its IPO price during the session, making it more predictable for investors. 

“The aforesaid price control mechanism to be implemented w.e.f August 04, 2025, shall be applicable only to the SME IPOs on the NSE Emerge platform and excludes Mainboard IPOs/Relisted Securities/Public Debt,” NSE added. 

According to experts, the price mechanism of the upper and lower bands will now limit extreme volatility in the initial trading of SME shares, a PTI report said. 

Investors now won’t have to face the risk of the stock opening at 30-50% below the issue price, making SME IPOs seem safer, as they generally are more volatile than mainboard IPOs. Similarly, if the stock is seeing high demand, it can’t open above 90% of the issue price. 

However, once the regular trading begins, volatility may persist, as this is just to stabilise prices at the start (during the pre-opening session).