With the stock market moving closer to new record peaks, watchdog the Securities and Exchange Board of India (Sebi) and the stock exchanges have enhanced their guard against manipulators.
The regulating authority as well as the bourses, which act like first-stage regulators in the stock market, have expanded their vigil for all kinds of stock manipulating attempts, including circular trading, insider trading and pushing up share prices through rumour-mongering.
Sources close to the development said that authorities are being extra-cautious this time, as a number of manipulating activities were noticed in the previous bull run, when the market benchmark Sensex had hit a record peak in early 2008.
The Sensex had scaled an all-time peak of 21,206.77 points on January 10, but after a sharp meltdown thereafter, which continued till March, 2009, it fell to near 8,000 points.
However, the markets have recovered since then and the Sensex last week regained the 20,000-point mark and rose to as high as 20,105.54 points on September 22.
A senior Sebi official said that a number of cases had come up in 2008-09, wherein market manipulators -- and in some cases, companies or their top officials -- also had pushed up share prices to cash in on retail investors' growing interest in the markets in the midst of the bull run.
Small retail investors generally get attracted to the market only after new peaks have been achieved by the indices and sometimes they get lured into already expensive stocks by these market manipulators, the official said.
Once the small investors are lured into these stocks, whose prices have been inflated by measures like circular trading and rumour-mongering, the manipulators make a quick exit at higher levels, he added.
On the radar of the regulator and the bourses would be those seeking to push share prices through 'planting of positive reports' outside the regulatory framework of first informing the exchanges, a senior official at a leading bourse said.
As part of their efforts, Sebi and the bourses will keep a close eye on reports from the media, brokerage firms and investment banks about already listed or to-be-listed firms and would seek to verify the authenticity, as well as the source and intention of these reports, the official added.
These efforts would include consulting information in the public domain, as well as seeking details from the concerned companies and other authorities, the Sebi official said.
Another area of concern for the regulator is high pricing of public issues in times of a bull run. Sebi Chairman C B Bhave last week rued the trend in a conference of merchant bankers and asked them to price public offers reasonably.
Sources said that the Sebi might consider bringing in some norms for greater transparency in the way public offers are priced to ward off any attempt to keep the prices at unreasonably high levels.
