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Vivek Law
Mumbai, Oct 14: The Securities & Exchange Board of India (SEBI) has zeroed in on two foreign institutional investors -- Morgan Stanley and Schroders -- for pressing "abnormal" sales, accounting for more than 70 per cent of the total sales effected by all FIIs on October 5.
According to SEBI sources, while Morgan had sold shares of about Rs 84 crore on that day, Schroders had accounted for sales of about Rs 38 crore.
SEBI senior executive director (surveillance and investigations) LK Singhvi confirmed that these two FIIs had been found to have effected "abnormal" sales on that fateful day when the market recorded its third-worst crash in a day by 224 points.
"While any FII is most welcome to conduct normal trading, there is definitely something abnormal when just two FIIs press huge sales which is not entirely in keeping with the general trading pattern. These two accounted for over 70 per cent of the sales and is something to look at closely," said Singhvi.
"We are primarily concerned with what led tothe selling on that day. When other FIIs were not selling so heavily what prompted these two FIIs to offload stocks in such a manner. We have sought details and will be able to come to any conclusion only once the investigations are completed," he said.
SEBI has already sought details of all the top sellers on that day from leading stock exchanges. And is at present piecing together the data received from them and other sources in order to ascertain whether the fall was the handiwork of a bear cartel.
Sources said that this is not going to be an easy task as the deals would have been pressed through several brokers to prevent the possibility of detection as well as overcome the hurdle of exhausting the gross exposure limit.
"Such huge sales could have only been spread across several brokers. It is therefore going to be rather difficult to detect persons who acted in concert. With strict enforcement of gross exposure requirements at some stock exchanges, the trades are often passed over to another brokerwho has not breached his exposure limits. It appears that this time around too the deals were wide spread," said a source.
However, the involvement of FIIs in hammering the market has given a new dimension to the entire episode. The crisis at Unit Trust of India too is linked to the same problem. It is felt that a section of market could have derived gains through spreading misinformation about the health of the country's largest mutual fund so that they could benefit from the fall in the market.
Reports emanating out of the capital indicate that the government appears upset with the role of FIIs in pulling down the market. While there is a view that there is no way one can restrict an investor from selling stocks, government sources say that in the past too a set of FIIs have resorted to massive sales ahead of a GDR offering and that any unusual trading activity needs to be scrutinised closely.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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