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Journalism of Courage
MUMBAI, JANUARY 4: While the Sensex has crossed the 5,500 mark, the sustained rally in dud stocks of non-banking finance companies (NBFCs) in the last two months has raised many eyebrows. In spite of “strict vigilance, investigation and hike in margins” by stock exchanges, several NBFC stocks which were quoting below Rs five have shot up, raising fears of price manipulation.
According to market sources, most of these NBFCs have stopped operations and many of them are yet to get registration of the Reserve Bank of India (RBI). Kirloskar Investment which was banned by the RBI from taking fresh deposits from investors shot up from Re one to Rs 22 before closing at Rs 13.20 on the Bombay Stock Exchange last week.
“The rise in the prices of these NBFCs is not because of the Sensex rise. Some NBFCs which are not registered with the RBI are also going up. The RBI and SEBI should take action against such companies. How can an NBFC which has refused to register with the RBI be allowed to be traded on thestock exchanges? How can an NBFC which was banned by the RBI shoot up on the stock markets?, ask Kirit Somaiya, president of the Investors Grievances Forum.
Sawaca Finance, which was suspended by the BSE recently, was rarely traded on the bourse till last October. However, the scrip began its ascent from its October 26 level of Rs 6.80 and on Monday, it closed at Rs 35. Ditto is the case with other NBFCs.
Market regulator SEBI has written to the RBI asking for the list of NBFCs which have failed to register with the RBI. As per the new RBI norms, NBFCs with net owned funds above Rs 25 lakh should register with the RBI before January 9, 2000. However, over half of 40,000 odd NBFCs have not registered with the RBI so far.
The BSE had recently initiated investigation into four scrips where sudden and unusual spurt in prices, coupled with rise in volumes were witnessed recently. The exchange is now looking into trading and price pattern of Alps Infosys, Cauvery Software, Media Video and Sawaca Finance.Pending investigation, as a proactive measure, the exchange has also suspended trading in these scrips from January 5 to January 7.
Of late, the BSE has been warning investors as well as its members to be on the guard against some B2 and Z category stocks, which generally have low market capitalisation and poor liquidity. The suspension of trading in the four scrips comes close on the heels of the bourse’s decision to suspend trading in the shares of Nexus Software, Bobshell Electrodes and Softrack Venture Investment.
BSE, in a letter to its members on December 30, has also cautioned them and asked them to inform their clients, “to check the fundamentals of a company before investing in it, particularly those which may have changed their names.
