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| Goldman fraud probe comes to haunt Indian markets |
| Ashish Rukhaiyar / Mumbai Apr 20, 2010, 00:42 IST |
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Shares of companies in which it holds stake fall more than the benchmark.
Shares of Indian companies in which Goldman Sachs has a sizeable stake came under heavy selling pressure today as more regulators joined the ongoing probe against the financial powerhouse. There are more than 25 listed Indian companies in which Goldman Sachs owns more than 1 per cent. The shares of almost all these companies fell more than the benchmark indices. Interestingly, an email with names of these companies was being widely circulated in institutional trading circles.
Some companies in which Goldman Sachs — a registered foreign institutional investor — has a sizeable stake are NDTV, Tamil Nadu Newsprint, Mastek, Aftek, CESC, ICSA (India), United Phosphorus, Spicejet, Country Club (India), Cox & Kings, Lanco Infratech, Hindustan Construction (HCC), Indiabulls Securities, Nucleus Software Exports and Rain Commodities.
While the Sensex shed a little over 1 per cent today, the shares of companies in which Goldman Sachs has a sizeable stake lost more than 2 per cent. These included Nucleus Software (down 6.36 per cent), Spicejet (4.17 per cent), ICSA (4.68 per cent), Rohit Ferro Tech (4.07 per cent), Rain Commodities (4.16 per cent) and Cox & Kings (3.33 per cent).
“There will obviously be a set of cautious investors who will be withdrawing from Goldman Sachs in the backdrop of the recent probe,” said the head of an institutional trading desk of a domestic brokerage. “Hedge funds would be the most concerned and some unwinding could happen in India to transfer funds to such investors. Such a probe against a global financial powerhouse does impact sentiments,” he said.
The New-York headquartered financial major found itself in the dock after the US market regulator, the Securities and Exchange Commission (SEC), filed a suit against it and an employees for defrauding investors of $1 billion through a subprime-related financial product. According to SEC, in early 2007, Goldman Sachs created and sold a CDO (collateralised debt obligations)-linked to subprime mortgages without disclosing that hedge fund Paulson & Co helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.
The SEC probe has been followed by the UK, where Prime Minister Gordon Brown has asked the Financial Services Authority (FSA) to probe the UK operations of Goldman Sachs. Brown has been quoted as saying that “this is one of the worst cases of moral bankruptcy that he had seen”.
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THE FEAR SPREADS
|
| Sr |
Company |
Quarter
end |
Goldman’s
holding (%) |
BSE closing
price (Rs) |
% fall |
| 1 |
New Delhi Television Ltd |
Dec ‘09 |
8.14 |
120.50 |
-2.11 |
| 2 |
Tamil Nadu Newsprint & Papers Ltd |
Dec ‘09 |
7.73 |
93.20 |
-2.87 |
| 3 |
Mastek Ltd |
Mar ‘10 |
4.41 |
295.25 |
-2.20 |
| 4 |
Aftek Ltd |
Dec ‘09 |
4.11 |
16.60 |
-2.35 |
| 5 |
CESC Ltd |
Dec ‘09 |
3.46 |
389.20 |
-1.14 |
| 6 |
ICSA (India) Ltd |
Mar ‘10 |
3.43 |
125.40 |
-4.68 |
| Goldman has invested in 21 other companies in India, which include SpiceJet, Cox&Kings, IVCRL Infrastructures, United Phosphorous and KS Oils |
Incidentally, on Friday, shares of Goldman Sachs lost nearly 13 per cent to close at $160.70 on the New York Stock Exchange.
Meanwhile, back in India, an institutional trader not allowed to be quoted in the media said Goldman Sachs funds had been selling in the last couple of days. “They have an in-house hedge fund that will obviously come under some pressure in the days to come if the probe takes an unhealthy turn for the financial major,” he said. An email sent to Goldman Sachs India on whether the probe against the firm in the UK and the US would impact the Indian arm did not elicit any response till the time of going to press.
The European Union is also probing Goldman Sachs’s role in arranging swaps for Greece that may have helped in hiding the country’s budget deficit. Reports further suggest that Germany’s financial regulator has also asked the SEC for details on the suit.
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