Sebi moves to six-month average to calculate m-cap

The markets regulator, Securities and Exchange Board of India, has set a new methof of calculating the market capitalisation of listed companies.

Instead of using the market capitalisation of a single day, the companies will now use the “average market capitalisation” for a six-month period.

As the market capitalisation of a listed entity fluctuates on a daily basis, an average of market capitalisation figures over a reasonable period of time (six months) would give a more accurate market size of the listed entity.

The new amendment would come into force with effect from December 31, 2024, Sebi said in a notification on May 17.

The market capitalisation would be calculated from July 1 to December 31, with December 31 as the cut-off date.

After determining the six-month average as on December 31, there would be a three-month transition period, or from the beginning of the immediate next financial year, whichever is later, before the relevant provisions become applicable.

Amending the listing norms, Sebi said, “Every recognised stock exchange shall, at the end of the calendar year i.e., December 31, prepare a list of entities that have listed their specified securities ranking such entities on the basis of their average market capitalisation from July 1 to December 31 of that calendar year”.

In case ranking of an entity changes for three consecutive years, the new provisions would cease to be applicable for the listed entity, providing relief to entities experiencing fluctuations in market capitalisation.

(With inputs from PTI)