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More Indian Insider Trading Malfeasance exposed as SKS Microfinance falls 20% before Loss Announcement

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Indian Stock Markets are a very dangerous place to invest with circular trading,fleecing of retail investors by¬† management,pump and dump schemes in IPOs as common as a bid ask spread.The stock market regulator SEBI is mostly toothless failing to act against known stock manipulators known as “market operators” who act with impunity.The latest malfeasance has hit the stock of SKS Microfinance which was one of the most hyped IPOs last year with fabolous growth and profit figures and a high valuation.However the stock has seen its fortunes go down with the Andhra Pradesh government launching a crackdown against the Microfinance Companies.This was done after the usurious interest rates and bad practises leading to suicides amongst borrowers.The stock has already touched new lows before it fell another 20% circuit down filter on April 6 2011.

Note the stock fell before it announced the results after the close of the markets which means that insider trading had take n place.The volumes at 10 times certainly seems to hint so as the JP Morgan downgrade of the stock could not have led to such a big fall in which there are a large number of foreign and domestic funds as investors.Besides its problems in Andhra Pradesh are hardly new and Indian brokers hardly that good that their reports cause such big stock price movements.Like other SEBI probes expect this one to fail or result in a small penatly which will not deter more such white collar fraunds in the Indian Stock Market.Insider Trading in India is quite widespread with some of the biggest business groups having been fined by SEBI like ADAG etc.

Mid cap and Small Cap Stocks are havens for rigging by promoters and stock brokers as SEBI seemingly does nothing.Even in the primary market,junk IPOs rule the roost with even the recent correction failing to see crap stocks making a debut (Sudar Garmets,Fineotex,Omkar etc.).To anyone with a modicum of common sense it is apparent that such low quality companies could not raise money without manipulating the markets.However SEBI in its infinite wisdom remains blind to this.Stock brokers like Ashika,Dangi continue to operate unimpeded despite being indicted for scamming.Even reputed stock brokers are involved in underhand and shady dealings.However SEBI does nothing indirectly encouraging fleecing of small and retail investors.Not that big investors like Goldman,GMO are immune to fly by night operators as well.

SKS Microfinance stock plunge faces regulatory probe

A steep plunge of 20 per cent in SKS Microfinance shares, hours ahead of its fourth quarter results on Friday, has come under the regulatory lens for possible breach of insider trading norms or hammering by a bear cartel.
The plunge was coupled with about 10-fold surge in the stock’s trading volumes, prompting the bourses and market regulator Sebi to conduct the probe, sources close to the development said. When contacted, a company spokesperson told PTI that SKS Microfinance has not received any communication in this regard from either Sebi or the stock exchanges. However, sources said the surge in trading volumes and a heavy fall in shares — on a day when the company announced a loss after the market hours — is being viewed as an unusual event to the market surveillance authorities and therefore they have begun a preliminary probe. The matter is being probed for possible breach of insider trading rules or hammering by a bear cartel, sources added. The fall coincided with a strong upward trend in the market, when the BSE Sensex rose over 300 points, and happened a couple of days after RBI said that bank loans to micro finance lenders would fall under the priority sector lending. The RBI decision was welcomed as a boost for the micro finance sector by SKS, the country’s only listed company from this space. SKS Microfinance shares opened weak on Friday, May 6, and hit the lowest permissible level for the day — which was also the lowest price in its history at Rs 330.65.

During the day, marketmen attributed the fall to price target cut for the stock by JP Morgan by more than half from Rs 550 to Rs 200 due to weakening business model. in the evening, the company announced results for the fourth quarter ended March 31, which were uploaded on the websites of BSE and NSE at 6.26 pm and 6.35 pm respectively — which was well after the market closing. company reported a net loss of Rs 70 crore on lower income from operations and high credit costs. SKS had a net profit of Rs 63 crore in the year-ago period.


Abhishek Shah

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