The Indian stock market took a beating on Monday, with some of the consumer, infrastructure and retail stocks declining 3-20% as sentiments dampened following squawk about reports of a major stock market scam that includes stock broker Ketan Parekh.
The alleged Intelligence Bureau (IB) report disclosed names of prominent market participants such as Piyush Sampath and Raju Shah along with Ketan Parekh, who continues to manipulate stock prices by creating false volumes, and using circular and insider trading.
The 30-share Sensex fell 129.14 points, or 0.74%, to close at 17,391.98, while the broader 50-share NSE index lost 41.80 points or 0.79% to close at 5,275.15.
Parekh has been reportedly found to have bought lakhs and millions on a single day in these shares in the run-up to an IPO or a qualified institutional placement (QIP) and then offloaded these shares after the IPO or QIP is over, resulting in sharp fall in prices.
Goenka Diamond and Jewels crashed 19.95%, Orchid Chemicals and Pharmaceuticals declined 5.11%, IVRCL Limited fell 6.70%, Dewan Housing Finance dwindled 14.49%, Pantaloon Retail ended down 3.54%, GMR Infrastructure fell 4.96%, and Tribhovandas Bhimji Zaveri closed 6.13% lower after these stocks were said to be named in the alleged IB report.
?Stocks that are in news of being manipulated have low liquidity. This is basically called market-making scheme. There is no system to improve market liquidity and there is a need to deeper in the system to address this problem instead of pointing out to individuals,? said Deven Choksey, managing director, KR Choksey Securities.
The alleged IB report also revealed that Parekh and his associates has links with some senior LIC officials and insurance companies to sell the shares back to these cash-rich entities.
?Sentimentally, the news (IB report) may have hit the market in a bad way. However, due to overbought nature on the daily chart, some consolidation or minor pullback is likely this week. This pullback should be treated as a normal corrective move and not as reversal of existing uptrend … Expect the market to trade in the range of 5,420-5,260,? said Shardul Kulkarni, head ? technical analysis, Angel Broking in its daily report.
Experts said that disappointing economic data from the US and China, along with a near 1% decline in the rupee, also hurt investor sentiment.
Choksey said that there is no significant impact of the IB report on the broader markets and the market will continue to focus on corporate India June quarter results, macro economic developments and government reforms.
