Stock
markets crash after Ketan Parekh arrested
(Posted on 31 March, 9:30 am)
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.
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