Mumbai, Aug. 3: Market regulator Sebi today barred 19 persons and entities — many of whom either reside in Calcutta or have strong links with it — from accessing the securities market and dealing in shares after a preliminary investigation identified them as the ones who had engineered the sudden plunge in four mid-cap stocks that convulsed the bourses on July 26.
The stocks were Pipavav Defence and Offshore Engineering, Parsvnath Developers, Tulip Telecom and Glodyne Technoserve.
The four midcap stocks fell 19 to 26 per cent on the Bombay Stock Exchange and the National Stock Exchange as a result of a “concerted attempt to artificially manipulate/depress the prices of these scrips in a disorderly fashion thereby adversely affecting the integrity of the securities market,” Sebi wholetime member Rajeev Agarwal said in a 22-page report released tonight.
The capital market watchdog smelt a rat because the bear cartel was putting out sale orders that were considerably lower than the last traded price, thereby bringing down the prices of these scrips.
The persons with direct Calcutta links are Ajit Kumar Jain, Manish Agarwal and Umang Nemani. The Calcutta-based entities are Neelanchal Mercantile, North Eastern Publishing and Advertising, Cheminare Trade Comm, Kuvam Plast and Milestone Shares and Stock Broking.
Neelanchal Mercantile and Milestone share a common address at 14 Princep Street. North Eastern Publishing is based at 5 Gorky Terrace.
Seven entities based in Delhi were also barred by the regulator — 4A Financial Securities, A to Z Steels, GN Credits, Gajria Jayna Precision Industries, Passion System Solution, Premium Hospitality Services and Venus Infosoft.
The axe also fell on Littlestar Vanijya, Ramkripa Securities, White Horse Trading and Yashika Holding.
On July 26, shares like Pipavav Defence & Offshore Engineering, Parsvnath Developers, Tulip Telecom and Glodyne Technoserve were among the midcap stocks that suffered a meltdown.
Tulip Telecom at one stage fell almost 45 per cent in intra-day trade and market circles had blamed the fall on rumours of a Calcutta-based operator facing difficulty, leading to some of his shares being sold by lenders.
Soon after the crash, Sebi and the two premier stock exchanges trawled the transactions in these scrips to see if there was any collusion between brokers and entities in engineering the fall.
According to the market regulator, the investigations showed that the “net sell” volume of these clients taken together ranged from 51 to 95 per cent of the total market “net sell” on the NSE and 31 to 58 per cent of the total market “net sell” on the BSE.
Sebi whole-time member Rajeev Agarwal said the persons and entities had placed substantial sale orders and fully disclosed them in order to create the impression that there was a huge selling pressure in these stocks right at the start of trading.
Several times the limit orders were placed at a price significantly below the last traded quote thereby bringing down the price of the scrips. he added.
In some of the scrips, the percentage of sales by the identified entities amounted to between 50 and 100 per cent of the total sale quantity in these scrips.
“In my view, generally, a seller would rationally seek a higher price to sell his shares; however, in this case the clients were placing sale orders at prices lower than last traded price , thereby bringing down the price of the scrips,” he said.
Agarwal was of the opinion that there is a prima facie case for conducting a detailed investigation in the matter with respect to the role of various entities.
“More importantly, normally a seller would desist from revealing its entire sell quantity since that may cause the supply-demand balance to immediately become unfavourable to the seller. The data for the short period of time in each scrip indicates several instances of fully disclosed orders which were also a significant factor in causing the sharp decline of approximately 20 per cent in price of each scrip,” the capital market regulator observed.
“If they are allowed to continue to operate in the market, the same is fraught with danger of immense mischief and incalculable damage to the securities market besides undermining the confidence of the investors in the fairness and integrity of the market. It is, therefore, my considered opinion that immediate and urgent intervention to prevent the continuance of such operations is warranted’’, he said, adding that pending detailed investigation, effective and expeditious action is required to be taken to prevent any further harm to investors and securities market and in order to protect the interest of investors and the integrity of the securities market.