Ruchi Soya and National Steel drop after Sebi ban on dealing in the securities market

Ruchi Soya Industries and National Steel and Agro Industries tumbled 5% to 10.88% at 13:30 IST on BSE after Securities and Exchange Board of India barred these commodity-market players from dealing in the securities market.

The announcement was made by Securities and Exchange Board of India (Sebi) yesterday, 24 May 2016.

Ruchi Soya Industries slumped 10.88% to Rs 19.65. National Steel and Agro Industries was locked at 5% lower circuit at Rs 11.26.

The order was passed in a case related to violation and manipulating as well as fraudulent dealings in castor seed derivatives in January 2016 on the National Commodity & Derivatives Exchange (NCDEX).

The order said Ruchi provided funds to five entities including National Steel and Agro Industries to take positions on its behalf. These entities created excessive long positions fraudulently, putting the market at risk. The exchange had to suspend the contracts on 27 January 2016. The Sebi order referred to bank entries showing how Ruchi had manipulated the market using these five entities.

NCDEX had detected a problem when castor prices started declining; the prices fell 25% in January 2016. Ruchi-led entities had then said they were not able to pay the mark-to-margin costs. NCDEX was then forced to suspend the contracts to avoid market-wide risk.

The order read that Ruchi Group Entities' had taken huge long positions in castor seed contracts and have violated the position limits prescribed by FMC. There was a prior meeting of mind among 'Ruchi Group Entities' to form a cartel and execute their trades in castor seed contracts. Ruchi Group Entities' have traded in castor seed contracts with a dubious plan and premeditated arrangement and artifice to corner /control the market on long side in castor seed contract. Ruchi Group Entities' have traded in such a manner and in high magnitude which has potential to disturb the market equilibrium and harm market integrity, it said.

The order said that considering the facts and circumstances,if found that the acts and omissions of Ruchi Soya Industries and National Steel and Agro Industries has, not only disturbed market equilibrium, but also indicate manipulative and fraudulent design to form a cartel and corner the castor seed market.

Ruchi Soya is one of India's leading cooking oil and soy food maker and marketer.

National Steel and Agro Industries is engaged in steel, agriculture, power and rental business.

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