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Thursday, December 9, 2010


Share Rigging can be described as attempts to pump up a company's stock price by floating favourable news about the company's earnings.

A report on the Indian stock markets prepared by the Intelligence Bureau suspects that a market operator, Vimal Rathod was accumulating shares on behalf maverick investor C Shivasankaran based on insider information. The IB has passed on the information to the CBI and the market regulator, the Sebi for further action.

SEBI is targeting some firms intimating that these companies have been involved in the price rigging activities.
Following are the companies which involved in show and created blood bath..

1) Shree Ashtavinayaka Cine Vision--Stock Price rocketed from 15 to 51 within 5 months back to 15 levels in 3-4days !!

2)  Karutari Global -- Stock Price rocketed from 18 to 38  within 5 months back to 158levels in 3-4 days !!

3) Ruchi Soya -- Stock Price rocketed from 90 to 140 within 8 months back to 82 levels in  2-3 days !!

4) Hanung Toys -- Stock Price rocketed from 125 to 410 within 11 months back to 190 levels in 4-5days !! 

5) Welspun Corporation -Stock Price was rangebound between 225-275  almost for 1 year  is now trading at 153 levels which is 52 week low !! 

6)Ackruti City Ltd -Stock Price was rangebound between 480-550  almost for 1 year  is now trading at 258 levels which is 52 week low !! 
7)Murli Industries --Stock Price was rangebound between 75-115  almost for 6 months is now trading at 55 levels!! 

8) Uflex Ltd -- Stock Price rocketed from 95 to 325 within 9 months back to 160 levels in 3-4days !!

How they did it?

As per Economic times the modus operandi in each instance was the same. The companies would have a set of investment arms, which would sell shares to various entities controlled by the Dangi group.

This cartel would then push up the stock price by buying some more shares from the market, and at the end of the operation, sell the shares back to the company’s investment arms. The profits would be shared by the Dangi group and the companies. The Dangi group entities traded through a large number of stock brokers, primary among them being Ashika Stock Broking, Sanchay, Systematix Shares & Stocks and Anand Rathi Financial Services.

What is the Penalty?

According to Economic Times late on Thursday, the regulator barred the promoter groups of Murli Industries, Ackruti City, Welspun Corporation and Brushman India from dealing in their shares till further notice, for colluding with share trader Sanjay Dangi and his associates, and the Ashika Group in rigging the stock price of their respective companies. Sanjay Dangi and his group of investment arms, and the Ashika group of firms too have been banned.

How spokes person of few companies responded?
Clarifying his stance on the issue, Naveen Jain, Company Secretary of K S Oils informed, "We understand from the mandatory disclosures made by Mr. Sivasankaran a few months back to us that companies belonging to him had purchased a certain block of our company shares in a secondary market transaction  from Citi Venture Capital, a private equity investor in our company.

Ackruti City Managing Director Vimal Shah said he would challenge the Sebi order. 

Whats the lesson to be learnt?

The saying ‘small is beautiful’ is always not true. Small and mid cap companies are prone to manipulation of stock prices by Operators.
Few Operators who specialise in rigging public issues,have set up off-shore entities, which fulfil the requirements for a ‘foreign institutional investor’ status. The operators then buy into the IPOs through these ‘FIIs’. 
In some cases merchant bankers agree to mobilise the funds as required by the promoter, but price the issue much higher. The difference is usually shared by the merchant banker and the operator. 

Whats going on now?

Few companies got clean chit and their share prices went up like rocket on Dec 11-2010
1) KS oil up 22%
2) Ruchi soya up 10%
3) Hanung up 5%
On 13th December
 KS oil agin up 10%
Ruchi soya 5%

On 14th December

KS oil agin up 1.5%
Ruchi soya 2%
Hanung up 9%

On 15th December

KS oil agin up 16%
Ruchi soya 2.5%
Hanung up 1.6%

On 16th December
Ruchi soya 2.9%
Hanung up 0.6%

---to be continued


1 comment:

Manjunath said...

Good share Kiran ...
We need to be more careful while choosing the stocks ...

Keep sharing :)