A study of the world's 97 best-performing stock market indices reveals that two Indian markets ranked among the top 30 in the world.
The unearthing of a mega scam on the bourses, perpetrated by rogue broker Ketan Parekh (KP) and several other major players, led to the tanking of the ‘ manipulated’ stocks on Monday.
Fearing a crackdown by market regulator Securities and Exchange Board of India ( SEBI) following Mail Today’s publication of the damning Intelligence Bureau ( IB) findings on Saturday, panicky investors deserted the counters associated with KP and his associates.
Goenka Diamond, one of the stocks named in the report, reported the sharpest fall by plunging 20 per cent to hit the lower circuit filter. Without the circuit filter, the stock could have plummeted further. The stock finally closed with a loss of 19.95 per cent at Rs 161.75.
Dewan Housing Finance Ltd, a Mumbai- based mortgage firm run by Kapil Wadhavan, also fell sharply to close with a loss of 14.49 per cent at Rs 156.40. In a statement to the BSE, the firm said: “The company and its promoters categorically deny any knowledge of such manipulation or any connection whatsoever with the so called brokers/ manipulators as reported in the media.
“As one of the leading housing finance institutions in the country, we would also like to place on record that DHFL has always complied with and continues to adhere to all directions/ guidelines laid down by the market regulator from time to time with strong corporate governance practices,” the firm contended.
Hyderabad- based infrastructure major IVRCL, another company whose name figured in the top- secret IB document, dipped 6.70 per cent to close at Rs 49.45 on news that KP and Company were jacking up these shares through circular trading. This entity was recently in the news because it was facing a hostile takeover bid by the Subhash Chandra- led Essel Group.
Mumbai- based jewellery firm Tribhovandas Bhimji Zaveri ( TBZ), which recently launched an initial public offer ( IPO), was also bear- hammered on Monday after its name found mention in the IB report. TBZ went down by 6.13 per cent to close at Rs 111.80.
GMR Infra headed south by 4.96 per cent to close at Rs 24.90 and the stock managed to recover a bit towards the end of the closing session. Orchid Chemical, which was among the firms under the scanner, was eroded by 5.11 per cent and closed at Rs 118.95.
Pantaloon Retail closed with a loss of 3.54 per cent at Rs 185.20, while penny stock KS Oil saw 5.61 per cent of its value being shaved off as it closed at Rs 5.72.
Sanghvi Forgings, too, bore a loss of 2.76 per cent after which it stood at Rs 84.60.
All these stocks plummeted soon after the beginning of trading hour when the news about KP’s surreptitious resurrection and the manipulation fraud hit the market. Only a few stocks managed a minor recovery from the day’s low. The IB report and details of KP’s involvement in rigging share prices was the main topic of discussion among brokers during the day.
Two stocks — Kiri Industries and Gokul Refoils — that were named in the report bucked the trend and surged on Monday. Kiri Industries gained 4.88 per cent to close at Rs 24.70 and Gokul Refoils closed at Rs 76.30, up 0.59 percent.
“This reaction was inevitable. There was large- scale selling pressure at the counters named in the report because people are apprehensive of regulatory action,” Deven Choksey, managing director of K. R. Choksey Share & Securities, said.
“There is fear in the minds of the people that SEBI would take notice and they will be affected as and when action is taken. That is why the stocks came under pressure. They will continue to suffer till there is clarity on the matter,” he observed.
According to brokers, SEBI should allow liquidity of stocks which do not attract buying attention from institutions and retail investors rather than looking into market manipulations.
“The regulator should design a system to allow liquidity to such stocks. Out of over 6,000 listed companies, only 200 are active in the market. What will the investors of the remaining 5,800 companies do? Where will they go?” a broker asking not to be named wondered.
“Operators like KP give them an opportunity to exit from a risky company. Now, the regulator should give investors the chance to exit,” the broker added.
Another broker said: “It is a well- known fact in the market that KP and Co have been operating. They are not here for charity. They are doing business and will continue to do so.” Alex Mathews, research head of Geojit BNP Paribas Financial Services, pointed out: “These stocks were rising sharply in the last few days and today they corrected due to profit booking, maybe partly due to the overbought position.”
Kishor Ostwal, CMD, CNI Research, was of the view that the stocks allegedly associated with KP in a report corrected on Monday owing to a knee- jerk reaction.
"These stocks will bounce back. Brokers sold these stocks and asked their clients to sell because most of the stocks were financed and no one could have taken the risk,” he felt.
Reproduced From Mail Today. Copyright 2012. MTNPL. All rights reserved.