Big Bull Parekh sends Sensex down 147 points

Big Bull Parekh sends Sensex down 147 points
ENS ECONOMIC BUREAU

Mumbai, Mar 30: Big Bull Ketan Parekh sent the markets crashing on yet another `Black Friday'. The involvement of Parekh in a major bank scam and reports of his arrest created a panic situation and triggered heavy bull unloading by investors, funds and foreign institutions resulting in a sharp fall of over 147 points in the bellweather Sensex for the seventh consecutive Friday on the Bombay Stock Exchange (BSE).

The scandal involving Parekh made the entire market panicky. Known in market circles as "Technology Bull" and "Bombay Bull", Parekh had a heavy influence on the price of highly volatile stocks -- particularly in the technology and media sectors. He was mainly responsible for the bull run in 2000 when Sensex hit the all-time high of 6150 in February 2000. There was no wonder all the ICE (information, communication and entertainment) stocks went into a tailspin and lost between 4-16 per cent on the day.

K-10 (ten favourite stocks of Ketan Parekh) counters like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer, in which Parekh has high stakes, bore the brunt of investors wrath as Bank of India which has lost Rs 130 crore in the pay-order scam has traced the orders to Parekh and filed a criminal suit against him.

Giving the stock market crisis a turn for the worse, Sensex began weak at 3714.11 and spiralled down to the intra-day low of 3589.93 before closing at 3604.38 as against yesterday's close of 3751.56, a net fall of 147.18 points or 3.92 per cent. The broad-based BSE-100 Index too slipped by 74.59 points to 1691.71 from previous close of 1766.30.

Pursuing the money trail from the failed Madhavpura Cooperative Bank of Ahmedabad, Bank of India (BOI) has stumbled on accounts of three shell companies belonging to operator Ketan Parekh to which he has allegedly routed a whopping Rs 660 crore. Reporting its findings, BoI also filed a complaint with the Central Bureau of Investigation against Ketan Parekh. It has informed the Income Tax department as well.

Parekh was among six leading brokers whose residences were raided by tax authorities last week. In fact, the market was agog with rumours that Parekh was facing a financial crisis following the steep erosion in infotech counters in the last one month. The Nasdaq fall in the last one month added to his woes and most of the K-10 stocks, led by HFCL and Global, were falling like nine-pins in the last a few weeks.

The crisis is the worst faced by Indian equity markets since April, 1992when Harshad Mehta, called the "Big Bull" by local newspapers, was involved in a Rs 5,000 crore plus scam. That scandal involved the illegal channelling of bank funds into the stock market through the collusion of bankers, brokers, and public and private sector companies.

Dealers said it makes no sense to players to carry over their outstandings to next settlement with various kinds of margins --- 25 per cent special, 10 per cent daily and 35 per cent carry forward on sales and purchases. The market has witnessed a sell-off every Friday since February 16, and March 2 and 9 (both Fridays) were recorded in the history on Indian bourses as `Black Friday'.

Sensex tumbled by 107.67 points on February 16, 140.39 points on February 23, 176.49 points on March 2, 174.98 points on March 9, 74.12 points on March 16 and 78.69 points on March 23.

The continuous flow of profit warnings by technology majors on the Wall Street coupled with slowdown in the activity of foreign institutional investors (FIIs) also dampened the sentiment. The Nasdaq Composite Index dipped by another 33.56 points last night. Himachal Futuristic was stuck in the 16 per cent lower circuit filter at close.

Anup Bagchi, chief operating officer (COO), Icicidirect.com, said the market witnessed complete lack of liquidity on Friday and as a result the turnover also slumped. "With low volumes at the bourses, buying or selling of a small quantity creates distortion (huge vilatility either way) in prices," he said.