Sucheta Dalal :Price Manipulation: We don't know honest!
Sucheta Dalal

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Price Manipulation: We don't know, honest!  

December 13, 2011

Will the regulator at least make an attempt to know?

Sucheta Dalal

Stock exchanges have taken another step in what they imagine is ‘clarifying’ sudden price movements to the larger body of investors. Moneylife has frequently pointed out that insider trading and concerted price manipulation first becomes evident from the spike in trading volumes and stock prices. So the market surveillance departments of the two exchanges coordinate with each other to shoot out queries to management when stock prices exhibit irrational exuberance. How does this help? Well let’s look at three press releases issued in this connection by the National Stock Exchange (NSE) in the first week of December.

On 8th December, it sought clarifications from Indiabulls Financial Services (for spike in volume), Parenteral Drugs (India) Ltd and Autoline Industries (for spike in prices). Both, Indiabulls and Parenteral Drugs replied that they were unaware of any price-sensitive information which would have caused a spurt in the price/volume of their stocks. Autoline’s response was excellent. It said the price spike could be in anticipation of sale or development of land that could fetch Rs80 crore-Rs86 crore. We need to monitor these releases to see whether Autoline is a rare case of excellent governance standards or other companies also exhibit the same candour.

On 5th December, the bourses asked Apollo Hospitals about a jump in its trading volumes and again drew a blank. The same thing happened on 1st December when Money Matters Financial Services was asked about a steep 50% price spurt over two weeks. The company claimed it had no clue, but a website immediately offered a detailed explanation. Top executives of Money Matters had been arrested on charges of colluding with LIC Housing Finance and charge-sheets were filed only in October 2011. How do these answers help or educate investors? We think this shifts the ball to SEBI’s court (which has twice invested in expensive market surveillance systems); and it must be forced to order an investigation. Otherwise, the entire exercise is yet another sham in the name of investor protection.

-- Sucheta Dalal