Indian Stock Mkts a Manipulators Paradise?

In India laws and regulations are for the common man, and this is common observation.

Sadly insider trading, stock price manipulation, and policy leakages at the highest levels that benefits a few informed partys is very routine. But action is rarely taken and if taken is so insufficient that it becomes a joke. Normally the stock exchange and the regulator are found napping… and here is one more instance…

In an outrageous attempt to manipulate a low-priced stock, the shares of KGN Industries (Z group) (formerly an NBFC named Royal Finance) opened at Rs 72 and hit an incredible Rs 55,000 within two hours on the first day of relisting. All this, with just 827 shares changing hands. The wild swing in the share price immediately caught the attention of the stock exchange surveillance department, which suspended trading in the stock at 12.20pm, when the scrip touched Rs 15,000. At this price, the stock commands a price to earning ratio of 22,119 times its FY08 earning per share of Re 0.68. Surveillance officials at BSE met on Wednesday evening to discuss the issue and made enquiries with the promoters about the scrip’s rise. ET

Looks like the Regulation by SEBI, allowing the re listing of a company, without any circuit filters in place is the culprit yet again. Lets see what action will be taken in such a blatant case of regulatory lapse, as chairmanship of SEBI has changed hands.

Interestingly this regulation had been brought in after the English Indian Clays Limited (EICL) mess, where BSE had relisted it on 13 March 2008 at a low base price of Rs179 to start off the trading, without checking the intrinsic value of the Thapar group company whose shares were trading at Rs1,690, a day before its de-merged investment division was reflected in the stock price. Read SD

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