Regulators begin sweeping probes

Both RBI and Sebi have started enquired into recent share price crash.

The investigations into the recent share price crash will be sweeping.Sebi has put investigations under the overall charge of wholetime director TM Nagarajan, and is expected to present its preliminary report within a month. Officials refused to comment on a time frame.

The RBI and Sebi jointly are understood to be putting under the scanner the investment arms and subsidiaries of banks and financial institutions for assessing the involvement of a bear cartel in hammering down the prices of public sector undertakings' stocks.

According to sources close to the development, these subsidiaries include mutual fund houses, non-banking finance companies and broking houses floated by banks and financial institutions.

The assessment will cover deals conducted by these houses over the last few trading sessions when the market saw a meltdown of PSU stock prices. Both proprietary and merchant transactions routed through banks will be analysed.

Meanwhile, the Sebi team got down to work today and is expected to sift through data on sales and purchase patterns of foreign institutional investors, especially those that are clients of merchant bankers associated with the current issues.

Sebi sources said data had already started coming in from the stock exchanges. While the team is specifically focusing attention on the stockmarket's fall from February 19 onwards, it has sought data on prior periods as well.

"We want to see the pattern of sales and purchases in these (PSU) scrips in the run-up to the offers," a source said.

Sebi had sought data on scrip-wise, broker-wise trades and open positions in the futures and options segment. The intention is to see whether there was any deliberate attempt at hammering down the prices of these scrips and whether there was any concerted selling by the brokerages on behalf of their FII clients, officials said. Incidentally, Sebi is also looking at the proprietary trading details of the brokerages concerned.

On Wednesday, Disinvestment Minister Arun Shourie had voiced his suspicion of a bear cartel sabotaging the government's disinvestment programme.

While officially Sebi is maintaining the stance that it is a "routine inquiry" into the fall in the market, sources confirmed that the inquiry had acquired the overtones of a formal investigation after the minister's statements in Delhi.

The RBI is also understood to be tracking the outflow of funds from the country to find out the agencies involved in routing transactions on behalf of FIIs.

Market sources added that even though the FIIs have been selling, there has not been much foreign exchange outflow from the country as the spot rupee-dollar exchange rate did not see much pressure and the rupee has been appreciating.