IB report spooks markets; small, midcaps take a hit

BSE smallcap index has lost 7.5% in one week

The share prices of many small and mid-cap companies are sliding in anticipation of a crackdown by regulators on stock market operators named in an alleged Intelligence Bureau (IB) report.

The report has been in circulation in the markets for nearly a week. Stocks in the Bombay Stock Exchange (BSE) small-cap index that have fallen a little over 45 per cent over this period include Parekh Aluminex, Midfield Industries and Comfort Intech. In the BSE mid-cap index, Ruchi Soya, K S Oil and Shree Ashtavinayak have fallen around 26 per cent.

During the period, the BSE smallcap index has fallen 7.5 per cent while the BSE midcap index has lost 4.8 per cent.

The report, dated September 20, and said to be prepared by outgoing IB chief Rajiv Mathur, apparently named stock market operators like Ketan Parekh, Vimal Rathod, Sanjay Dangi, Raju Barter, Ashok Poddar, Manish Marwah, Dinesh Singhania, Raj Agarwal and C Sivasankaran, the last a non-resident Indian.
 

TOP 5 FALLS OF THE WEEK
	1-Dec	8-Dec	% Chg
BSE Midcap scrips
Ruchi Soya	123.60	89.30	-27.75
K S Oils	47.40	34.25	-27.74
Shree Ashtavinayak Cine Vision	23.85	17.60	-26.21
Glodyne Technoserve	1093.50	807.05	-26.20
Welspun Corp	220.60	163.60	-25.84
BSE Smallcap scrips
Parekh Aluminex	509.65	267.20	-47.57
Midfield Industries	424.25	229.00	-46.02
Comfort Intech	13.51	7.36	-45.52
SVC Resources	304.10	166.95	-45.10
Uflex	262.89	163.00	-38.00
Compiled by BS Research Bureau                                            Price in Rs

The Securities and Exchange Board of India last week banned Dangi from operating in the market. But this action was supposed to be based on a tipoff from the income tax department.

The report is supposed to have spoken about operators manipulating stocks of Ruchi Soya, K S Oil, SKS Microfinance, Ackruti City, Karuturi Global, Orchid Chemicals, Cairn India and Hindustan Oil Exploration, among others.

on Wednesday, Ruchi Soya tanked 27 per cent to Rs 89.3 on BSE. KS Oil fell 14.7 per cent to Rs 34.25. Karuturi Global was down 9.9 per cent to Rs 19.80 after a news channel ran a story on the report.

“The so-called report and rumours in the market have spread fear among investors. Most small and mid-cap shares are falling, as investors and operators are making attempts to exit. The classic example is Shree Ashtavinayak, locked in a lower circuit for eight consecutive sessions,” said a Mumbai based broker.

Naveen Jain, company secretary of K S Oils, said, “We understand from the mandatory disclosures by Sivasankaran a few months back to us that companies belonging to him purchased a certain block of our company shares in a secondary market transaction from Citi Venture Capital, a private equity investor in our company. The company is unaware of any other dealings.”

Karuturi Global Ltd said it had been transparent in its dealings. The company officials said through their information bulletin on NSE and BSE websites that they had no direct or indirect dealings with any of the brokers banned by Sebi.

The Sensex on Wednesday shed 238.16 points to end at 19,696.48, its lowest closing in December. The Nifty ended at 5,903.