Ranbaxy stock spurt casts shadow on Sebi’s surveillance mechanism

Sebi is believed to have started a preliminary enquiry into the case.

Mumbai | Published: April 9, 2014 1:13:03 am

Shares of Ranbaxy surged 45.6 per cent in intra-day trading on Monday ahead of the $3.2 billion takeover announcement by Sun Pharma.

The stock, which was quoting at Rs 346.75 on March 27, opened 10 per cent higher on Monday and surged to Rs 505 (intra-day), recording heavy volumes.

“Doesn’t it look fishy? On Friday, the volume in Ranbaxy shot up to Rs 108 crore from just Rs 8.44 crore on March 27. Can anybody explain this phenomenon? It appears somebody was trading in Ranbaxy shares with specific knowledge that it is going to be taken over. Sebi should get to the bottom of this case,” said BSE dealer Pawan Dharnidharka.

Sebi is believed to have started a preliminary enquiry into the case. An official with the regulator refused to comment. “We would not like to comment on any individual case,” he said.

It is precisely such sudden price surges that Sebi’s Integrated Market Surveillance System or IMSS was supposed to spot. The regulator had carried out upgradation of the IMSS, through which it collects data from a variety of sources to identify suspicious market activities.

“This system should have alerted Sebi officials when Ranbaxy volumes and prices surged,” Dharnidharka said.

However, others believe that the system is quite robust. “The regulatory framework devised by Sebi is quite comprehensive.

Procedural lapses in the matters of insider trading… are taken up quite seriously. Preventive measures are prescribed by regulators. It is the corporate management and deal teams that need to abide by them,” said Mahavir Lunawat, Group MD, Pantomath Advisory Services Group.

If an individual with insider links had purchased 10,000 shares of Ranbaxy at Rs 346 per share on March 27 he would have made a profit of Rs 16 lakh on April 7. “It is hard to comment on the likelihood of insider trading as one really needs to be insider for that. But a close look at trends and facts does raise some questions,” added Lunawat.

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