If it's Friday India's stock markets must crash has almost become a given ever since Yashwant Sinha presented his "dream budget" end-February (and two weeks prior). The Bombay Stock Exchange Sensitive Index (Sensex) crashed by 147.18 points following the arrest of major bull operator Ketan Parekh by the Central Bureau of Investigation (CBI).
Parekh was held on charges of draining out Rs 1,370 million from Bank of India (BOI) through pay orders issued by Madhavpura Mercantile Co-operative Bank in Ahmedabad, Gujarat.
Parekh was taken into custody by the CBI's Bank Security and Fraud cell and is to be produced in court today morning. The worst hit were again the new economy or ICE (information, communication and entertainment) stocks because it is here that Parekh had maximum exposure. The euphamistically called K-10 (ten favourite stocks of Ketan Parekh) counters like Himachal Futuristic, Global Tele-Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer bore the brunt of investors wrath.
This is the second big scam involving banks and stock brokers after the securities scam of 1992 in which the infamous "Big Bull" Harshad Mehta was involved. That scandal involved the illegal channelling of bank funds of over RS 50,000 million into the stock market through the collusion of bankers, brokers, and public and private sector companies. Parekh's name was linked to this case as well but he was a relatively minor player then.
The CBI registered a case against Parekh after BOI filed a complaint Parekh had defrauded it. After the case was registered, the CBI raided Parekh's residential and office premises in Mumbai yesterday.
The stock markets went into a free fall on the last day of the settlement on BSE as panicky investors resorted to selling. The BSE 30-Share Sensitive Index (Sensex) fell by 147.18 points to 3604.38 from its previous close of 3751.56.
Finance Minister Yashwant Sinha, meanwhile, speaking in Delhi, said that the market regulator, Securities and Exchange Board of India (SEBI), was looking into the issue, indicating that some action could be taken only after its inquiry was over.
In a related development in Kolkata, CBI sleuths launched operations at the office premises of some leading stock broking firms after Parekh's arrest.
The Black Friday record: The Sensex tumbled by 107.67 points on 16 February, 140.39 points on 23 February, 176.49 points on 2 March, 174.98 points on 9 March, 74.12 points on 16 March and 78.69 points on 23 March.