Amit,
I would suggest to validate the below configs and give it a try, also go ahead and open a support ticket with http traces and necessary logs, if below suggestions did not help.
1. For Authentication of the users - are you using any other User directory other then the one created by IDM ? This possibly could occur, if you try to access the IDM url with an existing SiteMinder session.
2. Verify the "users" tab under policy(which was auto-created by IDM) and make sure right set of users has been added.
3. Try accessing the IDM base url with protected alias from Management Console instead of using localhost.
Hope this helps.
Regards
Ashok