STOCK MARKET CASE STUDY

STOCK MARKET CASE STUDY. Subimitted By:- Divya Deepak Mohite TYBMS.

Do you know what is STOCK MARKET ?.

Ketan Parekh Scam [Case Study]. Mumbai: Spl Sebi court bars Ketan Parekh from going abroad | Mumbai News - Times of India.

Ketan Parekh Is A Former Stock Broker From Mumbai,India Popularly Known As “Bombay Bull ”. Kp Arrested On 30 th March 2001 For The Security Market Scam Known As Ketan Parekh Scam. He Was Convicted In 2008, For Involvement In The Indian Stock Market Manipulation Scam In Late 1999-2001. Currently He Has Been Debarred From Trading In The Indian Stock Exchange Till 2017. He Was Trainee Of Harshad Mehta . Ketan Parekh Can Be Best Described As The Piper Of Dalal Street . Parekh Came From A Family Of Broker Which Helped Him To Create A Trading Ring In His Own..

How It Happened?. Formed A Network Of Brokers. Identify And Targeted 10 Stocks Namely:- Infosys DSQ Software Global Telesystems Himachal Futurisic Communications Pentamedia Graphics Satya Computers Silverline Technology SSI Zee Telefilms Nandy Communications Zee Telefilms Went Up From Rs.127 To Rs.2330, Himachal Futuristic Rs.194 To Rs.2553.

Funding Mechanism. Simple Borrowing Mechanism Badla System.

Badla System. Indigenous Carry-forward System Invented On The Bombay Stock Exchange. Badla Trading Involved Buying Stocks With Borrowed Money. The Stock Exchange Acts As Intermediary Intrest Rate Determined By The Demand For The Underlying Stock. Maturity Not Greater Than 70 Days.

How It Happened?. When Stock Prices Were High, They Were Pledged With Banks As Collateral. No Problems As Long As Price Were Rising..

How was It Detected. Stock Market Crash Of 2000 Ketan Parekh Started Borrowing Heavily Attempted To Rig The Price Upwards And Later Sell But Fail To Do So It Department Found Discrepancies In Sources Of Funds Of KP Routine Market Surveillance Of 5 Stocks.

Factors That Helped Ketan Parekh. Though KP Was A Successful Broker. He Did Not Have Money To Buy Large Stakers As He Held The Stakers Of More Than Rs.750 Million In July 1999, According To A Report. Analyst Claimed That He Had Borrowed From Various Companies And Banks For This Purpose. His Finance Method Was Fairly Simple. He Bought Share When They Were Trading At Low Price And Saw The Prices Go Up In The Bull Market While Continuously Trading. When The Prices Was High Enough He Pledge The Share With Banks As Collateral For Funds, And Also Borrowed From The Companies Like HFCL.

CONT………... It Could Not Have Been Possible Without The Involvement Of Banks A Small Ahmadabad –Based Bank, Madhavapura Mercantile Cooperative Bank [ MMCB] Was Ketan Parekh Main Ally In The Scam KP And His Associate Started Tapping The MMCB For Funds In Early 2000.

Implications. Ketan Parekh Was Arrested By CBI On 30 th March 2001. He Was Charged Defrauding Bank Of India By Almost $20million. Global Trust Bank And Bank Of India’s Merger Failure RBI Ordered Some Banks To Furnish Data Of Capital Market Exposure SEBI Inspected The Book Of Several Brokers Suspected Of Triggering The Cash ONE OF The Biggest Fall In BSE-700 Points KP And Traders Were Banned From Trading For 17years Short Selling Was Banned For 6months Badla System Was Banned All Shares That Were Put As Collaterials Should Be Done So Through NSE And BSE 10% Additional Deposit Margins.

Impact of the scams on financials institutions. Ketan Parekh Was Threatings To Sue The Banks Of India For Defamation Because It Complained Of Bouncing Of 1.3billions Pay Orders Issued To The Broker By Madhavpura Cooperative Bank Investigations By SEBI And CBI Reveal That Sheer Magnitude Of Money Moved By Parekh Was A Staggering 64billion.

Steps Taken By SEBI After Scam. SEBI Launched Immediate Investigations On The Scam It Suspended All The Brokers Members Directors Of BSE’S Governing Board SEBI Also Banned Trading By All Stock Exchange President, Vice President And Treasures SEBI Banned Naked Short Sales RBI Started Inspecting Accounts And Sub-accounts Twice A Year In Spite Of Once In Two Year SEBI allowed banks for collateralised lending only through BSE and NSE.