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Sebi probes into share movements of 6 firms

Sangita Shah & Janaki Krishnan

The Securities and Exchange Board of India is understood to have launched enquiries about the share price activities of six companies- S Kumars Synthetics, Hughes Escorts Communications, HCL Infotech, Tips International, Mukta Arts and Balaji Telefilms- and will be sending them letters seeking a broad spectrum of information on their share prices.

The stock market watchdog is trying to assess whether these companies had links with stockbroker Ketan Parekh and benefited from these connections. Indeed, Sebi officials hasten to state that the enquiries do not imply that the companies concerned are in any way guilty of any offence. "The enquiries are wide- ranging," said one official.

Sebi has, in fact, informed the Joint Parliamentary Committee that it had received complaints of price rigging in these scrips and that details of price movements in these stocks were being obtained.

The securities regulator opened investigations into these scrips only after it received several complaints from investors alleging price manipulation and rigging. The ongoing investigations are aimed at detecting whether price movements in these stocks show any clear pattern in late 1999, the whole of 2000, as well as the earlier part of this year- at least till the crash took place.

The Sebi investigations will focus not only on unearthing evidence of actual price rigging but also on trying to trace the source of funds involved in any sustained buying of these stocks. Sebi also wants to check out whether there the companies under scrutiny had any links and the brokers concerned. "This is all part of routine investigations," said Sebi officials, pointing out that in most instances price rigging almost always involves company officials.

So far the markets regulator was known to have focused on K-10 stocks - that is, scrips Ketan Parekh is widely perceived as having had a special interest in. Most of the investigations have so far centred on Parekh and how he routed his investments.

However, Sebi so far has actually got specific evidence only about six scrips -- Himachal Futuristic, Global Telesystems, Zee Telefilms, DSQ Software, Lupin Laboratories and Aftek Infosys. In its preliminary investigation report, too, Sebi dealt with only these six shares but had not ruled out investigations into other scrips as well.

Sebi's second report to be out soon

The Securities and Exchange Board of India is putting finishing touches to its second investigation report on the market crash and expects to release it in a few days time.

According to Sebi sources, the second edition, although not as voluminous as the first, details the various transactions related to parties named in the first report. It has also devoted more pages to the working of overseas corporate bodies, mainly sub-accounts created by local brokers, which were allegedly used to route funds into the stock market to boost trading volumes. The report has also given some interesting insights into how exactly the market crash occurred and the price manipulation which lead to the eventual crash in prices in the first week of March, 2001.

While the first report gave an overview of the market and the major transactions, the second report delves into the roles of the brokers as well as the exchanges. Sources said it has been able to detail the circumstances surrounding the manipulation of Himachal Futuristic Communications Ltd and Zee Telefilms share prices. However, in many cases the securities regulator has not been able to make much head-way as details are still not forthcoming. The fact that it has to depend on outside information in many cases has hampered the investigations.

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