Sensex crash -- Govt bears down

Sensex crash -- Govt bears down
ENS ECONOMIC BUREAU

MUMBAI, MAR 3: Concerned over the "abnormal" fall in share prices on Friday, the Securities and Exchange Board of India (SEBI) has launched an investigation into suspected manipulation of prices by a group of foreign institutional investors and brokers. The probe began on Saturday with officials visiting the offices of a leading FII, even as the crash showed signs of being linked to a leading bull operator with huge exposure in new economy stocks.

Sebi is also said to be looking at the possibility of imposing specific steps on Monday morning to check the slide, which has made finance ministry mandarins unhappy, considering that it has occurred despite the presentation of a pro-reform and growth-oriented budget.

Even as the probe has got under way, BSE authorities on Saturday slapped additional volatility margins ranging between 10 per cent to 25 per cent on 39 stocks, of which 10 are from the `A' group. The stocks include Himachal Futuristic, Global Telesystems, Pentamedia Graphics, Silverline Technologies and Zee Telefilms.

Said LK Singhvi, senior executive director, Sebi, who is in charge of the probe: ``We are investigating the nexus between top broking firms and whether there was any intentional selling to manipulate the markets.'' Singhvi said there was huge volatility from Budget day onwards, and the probe would look into exactly what was the reason for the enormous swings in the market. On Budget day, the market rose a huge 177 points, followed by massive gyrations the next day when major gains were wiped out and the Sensex ended with a moderate 25-point gain. However, the final blow came on Friday, when all the gains the market saw after the Budget were wiped out with a huge 176-point selloff led by technology stocks and investors wealth -- or market capitalisation -- plunged by a whopping Rs 35,000 crore in the market crash.

The probe is expected to look into how the wave of selling was carried out, and, more importantly, on whose behalf such sales were undertaken. Sources say most of the broking firms mentioned as parties involved in the bear hammering were carrying out deals for the `tech' bull who had been dumping technology stocks to cut his losses. The name of a private sector bank which was in the news recently has also been thrown up in this context, since the connection is that the bank also sold tech stocks to recover dues from the bull whose cheque to the bank is said to have bounced.

Finance Ministry officials, it is learnt, are perturbed by the way the market is being manipulated by bear operators in concert with powerful FIIs. "The market is back to square one even after presenting a growth-oriented and pro-market and pro-industry budget. It's plain manipulation," ministry sources said.

Singhvi said the markets regulator was in close touch with the BSE and the NSE to examine the trading data of the firms alleged to be involved in the bear hammering on Friday.

Despite the Bombay Stock Exchange (BSE) completing the pay-out of the settlement ended February 23, the market is still in the grip of fears of a payment crisis for the settlement which ended on Friday on BSE, the pay-in for which will be carried out on Wednesday, March 7. The BSE has called for the books of account of the bull operator to check for possible hammering of stocks.

A section of brokers are said to have sought the direct intervention of the Finance Ministry to loosen the grip of the cartel which has created undue panic in the bourses particularly in new economy stocks. "These brokers have expressed their view to the senior officials of the North Block that the `mission panic' in the market has been artificially created and it has been launched with the only intention to tarnish the ministry's image to revive the confidence of the retail investors in the stock market," sources said.