By Ruma Dubey

Five to six days ago, Core Education tumbled almost 80% in value over three trading sessions. The reason? Marketmen said that some lenders were liquidating shares of companies held as collateral from investors, who were unable to meet margin call pressures. IFCI sold 3.23% stake or 36.95 lakh shares through block deals.

Prior to this, on 25th Feb, there was a literal carnage in mid-cap stocks and leading the list of ‘crashers’ were Opto Circuit, Welspun, ABG Shipyard, Gemini Comm, Eros Intnal and many more. This crash in mid-cap stocks was said to be have been triggerd by huge selling by some ‘vested’ interests but once again, the main reason was pledged shares and margin money pressure. SEBI immediately bared its fangs and dug into the mid-cap carcasses, trying to probe into the real reasons.

But even while SEBI started the probe, today, NHPC is being played in the similar way and through the day, till now, it has plunged over 28% over the last week. When asked about the crash, ABL Srivastava, director (finance) at NHPC said that though the company had a list of its top 100 sellers, their transactions were not more than 3 crore share. He added to the mystery, saying that the selling was beyond fundamentals, beyond any logic and suspected a bear cartel at work.

This is precisely what SEBI’s probe into last week’s mid-cap carnage is also pointing at. SEBI has now unearthed that these ’50 portfolio’ stocks have been used frequently by market manipulators for personal gains. These are the same manipulators, which SEBI suspects are have been debarred from operating in the markets but continue to play stocks with gumption through ‘front’ entities. And each of this operator is said to have his own muse or favourite set of stocks and the slightest of tremor, be it upward or downward, leads to an earthquake like effect.  

SEBI has not named anyone, but news is that it is suspecting one particular brokers, barred from the capital markets last year who was responsible for manipulating some stocks. He is said to be very much in action and operating through a front.

If one may recollect, last year, investigations revealed that despite ban, Ketan Parekh and Dinesh Singhania continued to operate stocks and many such brokers were trading through accounts which were in the name of its domestic helps and office boys. Many brokers, requesting anonymity have said that there are many such small trading firms having gargantuan trading volumes. As most are not even registered there is very little which SEBI can do. But the big question which comes to mind is – how come such operations happen in the stock price without the knowledge of the promoters?

Ketan Parekh, for some years now is said to be operating through fronts and has been dealing through many brokers on profit sharing basis and many FIIs are also said to be operating through his ‘active’ advice. Dinesh Sighania is also said to be closely linked with Parekh and he connects directly with promoters having financial crunch and he ‘helps’ them maintain the share price at good levels. An Intelligence Bureau report in 2010 had showed how both together had worked to manipulate the price of Abbott and Piramal as they were said to have inside knowledge of the mega deal.

In 2012, once again Singhania’s name came up in stocks like Pipavav, Tulip, Parsvnath and Goldyne. News then was that these stocks had crashed due to margin money pressure on Singhania’s front firms who resorted to mass selling. Those in the know say that such brokers first depress the stock price, creating pressure on the promoters so that they can demand more margin money and when the brokers know that the promoter is sure to default, they create a sense of panic, spreading rumours of the pledged shares being sold and massive selling pressure comes in thus leading to a crash in the share prices.

There are many such brokers who continue to play up stocks despite being officially banned from the markets. Every time there is a carnage, ‘pledged shares’ is the angle used but this time around, many companies which have crashed have issued clarifications stating that there has been no selling of their pledged shares and in fact many have asked SEBI for a probe.

Let us see how SEBI investigates this carnage. But such incidents have now become annual events and SEBI had better learn the tricks soon or else, it could become a free-for-all gamblers den…. More than what it is today!