The second quarter results are a mixed bag. Although many companies have indeed done well, the growth momentum is clearly flagging. Foreign Institutional Investors (FIIs) have been quick to recognise this and dump stocks. They have pulled out over $1.1 billion from equity and debt in October alone. Yet, the Finance Ministry remains optimistic, but for worrying over a few penny stocks that are being ''looked into'' by the market regulator. A confidential note by Joint Secretary U.K. Sinha, dated October 17 available with this newspaper concludes, ''There is no cause for concern as the economy is robust with strong fundamentals. The PE ratios are comfortable and corporate performance during the couple of years quite strong in terms of sales and profitability''. Ironically, the BSE Sensex fell from 8202.62 on October 17 to 7685.6 on Friday, October 28. In fact, the Sensex dropped a steep 1012 points in the month of October. Also, several leading international investment houses are now far less sanguine about investing in India, until the government restarts reforms and pays attention to economic fundamentals. If anything, the ministry should worry that aggressive Indian mutual funds who invested over Rs 2,000 crore in a sharply falling market may be providing an exit to foreigners at the cost of domestic investors.
The same confidential note from Joint Secretary U.K. Sinha says that SEBI is looking into the price manipulation of specific scrips identified by the Intelligence Bureau. ''The IB is also suspecting that Ketan Parekh and Ashok Poddar have become active in the market again,'' says the note. While Ketan Parekh is an obvious target, having been identified as the central figure of Scam 2000 by the Joint Parliamentary Committee (JPC), the second name is rather curious. Ashok Poddar is a rather low-profile broker from Kolkata, and although he has been investigated several times, the transactions have hardly been serious enough to merit the attention of the IB. Meanwhile, the IB is curiously silent about another industrialist/market operator who is absconding from the country and has a Red Corner Interpol alert against him. Market sources report that he is not only active in the Kolkata market, but is also trying to cobble together a hedge fund for investing in India. However, despite mounting evidence of his shenanigans, including an attempt to get control of a Nasdaq-listed company, the government has maintained a thundering silence over his disappearance and made no attempt to seek extradition. Clearly, this shady businessman who continues to operate a call centre out of two locations in India has powerful political backers.
While on government action, the high flying Indiabulls is working overtime to correct the downward pressure on its stock price. It has been a rough ride for the investors of the brokerage company, ever since it attracted regulatory attention sometime in mid September. The scrip, with a two-rupee face value, was then trading at over Rs 230. Since then the market watchdog's investigation into several dubiously ramped up penny stocks have affected many Indiabulls clients. The Bombay High Court judgement freezing mill land development dealt a blow to its real estate venture and finally, a search by the Income Tax department caused further panic. The share price slipped to Rs 146 on Thursday, October 27. But Friday saw the company attempting a major comeback. The brokerage firm advertised a ''Personal Loan Mela'' offering spot loans of up to Rs two lakhs to ''everyone'' with ''no questions'' and a promise that borrowers can ''take your cheque on the same day''. For those who wondered at a brokerage firm advertising a loan-mela, the explanation was in an almost-impossible-to-read line at the bottom saying: ''Loan is offered at the sole discretion of India Bulls Credit Services Ltd,'' which is a non-banking finance company. On the same day, another newspaper carried another advertisement outlining its business operations. And that was enough to send the stock price sizzling up a curious 11 per cent to Rs 162.5 even when the BSE Sensex crashed another 112 points.