Ketan Parekh, brazen stock rigging and a helpless Securities and Exchange Board of India

Business

oi-Sunil

By Sunil Fernandes

Updated: Tuesday, July 10, 2012, 9:01 [IST]

Convicted stock broker Ketan Parekh is back, if reports are to be believed. And with him is stock rigging. According to a report in the India Today the Intelligence Bureau has unearthed a major stock market scam involving big players such as rogue stockbroker Ketan Parekh, who is currently under a SEBI ban until 2017.

In 2008, the special court of the Bombay High Court had held that Ketan Parekh along with others had executed three bogus fictitious and non-existent transactions on October 10 and October 22, 1991, and January 16, 1992, involving funds in the said transactions and diverted funds from Canfina to Canbank Mutual Fund (CBMF) and, thereafter, criminally misappropriated the proceeds.

That is very well history now with Ketan Parekh resurfacing according to the India Today Report, which reveals that an IB report submitted to the topmost echelons of the government, suggests that KP and his associates are driving up share prices through the creation of false volumes.

The report lists seven companies involved in illegal manipulation including the likes of Dewan Housing Finance Corporation Limited, Orchid Chemicals and Pharmaceuticals Limited , Pantaloon Retail (India) Limited, Tribhovandas Bhimji Zaveri, GMR Infrastructure and Goenka Diamonds.

According to it, the manipulating cartels have been using illegal means to buy shares so that the prices rise in the run-up to an IPO or a qualified institutional placement (QIP). These cartels have bought select shares in volumes that range from lakhs to millions on a single day, causing the stock prices to shoot up despite the bearish trend in stock markets.

Do a little stock research on the stock prices of some of these companies and you would find that the India Today story corroborates the evidence.

Goenka Diamonds one of the companies whose shares were manipulated according to the reports has saw its share price rise meteorically in a falling market.

The share price which was traded at just Rs 30 at the beginning of the year has risen five fold to Rs 180, defying any sense of logic, except the thought that the share prices could have been rigged. Similarly, another company IVRCL has seen its stock price double since the beginning of the year.

Insider trading and share manipulation have remained rampant over the years. SEBI banning individuals like Ketan Parekh from trading on the bourses does little to help, as he could act in the names of friends and acquaintances to rig share prices.

At times, the Securities and Exchange Board of India has taken appropriate action, but most of the times it has failed to check price manipulation. The volatility in share price movements of stocks like Pantaloon Retail, IVRCL and Goenka Diamonds clearly indicate the level of manipulation. How can a stock increase five fold in six months, when the market conditions have remained dismal and fundamentals of the company have not changed dramatically.

When there are hundreds of fundamentally strong companies languishing at pathetic valuations, why would investors be interested in debt riden companies with poor fundamentals. Clearly, it has to be manipulation at play. SEBI has and must do more to prevent rigging and manipulation on the bourses.

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