It has been nearly a decade now since Ketan Parekh, or KP, was banned from India's stock markets. But his name continues to haunt the Street. There was a mad rush among traders on Monday to exit many small and mid-cap counters after a report by the country's Intelligence Bureau (IB), which named KP and another Gujarat-based market operator Raju Shah, also known as Raju Barter, was circulated in the market.
Stocks including Dewan Housing Finance Corp and Goenka Diamond crashed by 14-20 per cent as the IB report, published by India Today magazine last Saturday, said KP and Barter were involved in rigging share prices and circular trading. Other stocks that saw a sharp fall as a consequence of the report, include Orchid Chemicals and Pharma, IVRCL, Pantaloon Retail (India), Tribhovandas Bhimji Zaveri, K S Oil and GMR Infrastructure.
Most of the companies have denied any involvement.
This is the second time in 18 months the IB is submitting reports to various regulatory agencies. The latest report said the operator cartel was in touch with some of the insurance companies to sell their shares to it. The report also names another little-known operator, Piyush Sampath, as a part of the cartel.
A close aide of Parekh, who did not want to be identified, said: "Parekh has seen the so-called IB report that is being circulated in the media and market. He doesn't know if IB would prepare such a report but is of the view that the person who has written it may be under a delusion. According to him, the report lacks logic."
Ketan Parekh was banned by the Securities and Exchange Board of India (Sebi) in 2003 after a joint parliamentary committee said the trader played a major role in stock market manipulation of 2000 and the Madhavpura Mercantile Coperative Bank (MMCB) scam, which was wound up this year. MMCB claimed KP owed it Rs 1,000 crore out of which they had received Rs 400 crore.
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According to the IB document, operators were using illegal means of buying shares in huge volumes, causing the stock prices to shoot up despite a bearish trend.
Similarly, there is evidence of Barter's active involvement in many counters such as Gokul Refoil and Solvent, Sanghvi Forging and Engineering and a top-of-the-line jewellery company’s initial public offering (IPO). According to market experts, these operators buy shares through the margin funding arrangement with stock brokers and the deals are settled through havala channels.
“Sebi takes action on all inputs received by it--including from government agencies. All these inputs are taken to their logical conclusion in the shortest possible time. Sebi has also a strong surveillance mechanism. In the year 2011-12, 74 investigations have been completed. In 2011-12, 1,060 civil enforcement actions have been taken. Sebi has been taking active measures to curb efforts toward market manipulation and take appropriate actions including, penalising the guilty,” Sebi said.
GMR said: "We strongly refute and completely deny any direct or indirect involvement of the company or its management in such alleged manipulation of the stock. GMR is driven by a set of values and we reiterate the conduct of the company and its management is consistently ethical and lawful."
Dewan Housing said: "Pursuant to a report in a section of the media, wherein Dewan Housing Finance Corp has been named as one of the company in which stock manipulation took place by certain broker’s/ market manipulators. 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."