Indian Stock Markets See Steady Rise In Shady Deals, Price Rigging


MUMBAI – There is a growing number of people in Indian stock markets for whom Gordon Gekko’s line ‘Greed…is Good’, from the Hollywood classic Wall Street, seems to be the mantra. Hard data from market regulator Securities and Exchange Board of India (SEBI) show that cases of market manipulation and price rigging in stock markets have steadily increased over the past few years, suggesting that a high-growth economy brings its own headaches for regulatory sleuths.

According to SEBI’s annual report, alleged instances of market manipulation and price rigging account for more than 50% of the total number of cases taken up for investigation by the capital market regulator.

In 2010-11, SEBI took up 104 cases for investigation out of which 56 involved charges of market manipulation and price rigging.

Other cases related to corporate governance irregularities, insider trading, takeover flaws and fraudulent transfer of shares.

A year earlier,  in 2009-10, the total number of cases taken up for investigations was 71 out of which cases of market manipulation and price rigging were 44. The trend in previous two fiscal years was much the same.

“In any growing economy such cases tend to increase as some people are always motivated by greed to earn easy money,” said Anand Rathi, founder and chairman of Anand Rathi Financial Services.

“It also shows the growing pro-active stance of the capital market regulator. Every time SEBI takes up a case for investigation, it creates fear among the wrongdoers,” he added on a positive note.

SEBI initiates investigation based on referrals received from sources such as stock exchanges, its own internal surveillance department and government departments in addition to information submitted by market participants and complainants.

“In appropriate cases, investigation may also be initiated suo-motto (on SEBI’s own initiative), where there are reasonable grounds to believe that investors’ interests are being adversely affected or there is a suspected violation of the provisions of the securities laws,” said a SEBI official.

Experts say malpractices bring a bad name to the market. “If there is price manipulation in one scrip, then at least 1,000 retail investors are robbed of their money,” SP Tulsian, an independent market analyst, told Hindustan Times.