Financial Daily from THE HINDU group of publications
Wednesday, Jul 09, 2003
Markets - Regulatory Bodies & Rulings
Mid-cap stock price swings come under SEBI scanner
MUMBAI, July 8
THE Securities and Exchange Board of India has started looking into the unusual movement in the prices of some mid-cap stocks, and investments by FIIs in these scrips over the last two months.
The Chairman of SEBI, Mr G.N. Bajpai, said the regulator had asked the exchanges for trading details. SEBI wants to ensure "fair play" by market participants and to keep up the transparency and efficacy of the trading system.
"Anyone flouting the rules will be punished," Mr Bajpai told Business Line.
There has been a sharp rise in prices over the last couple of months with major interest in mid-cap stocks. Stock prices have doubled in a very short period.
Since May this year, Sensex has gained around 22 per cent and in comparison the BSE 500 index increased by 30 per cent and NSE's Mid Cap Index gained 38 per cent. The rise in the stock price is attributed to heavy inflow of funds from FIIs.
FIIs had pumped in over Rs 3,800 crore in May and June. In July, so far, they have invested over Rs 650 crore in equities alone.
Asked whether hedge funds are investing in the Indian equity market through FIIs, Mr Bajpai said, "As a policy, hedge funds are not allowed to invest in the Indian market. But we have been looking into the investment patterns of FIIs and will come to know about the details."
However, he declined to comment on the action SEBI would take in case hedge funds are found investing in the equity market. Hedge funds are like any other mutual funds, but they invest in the equity market with short-term investment perspective with high-risk and return. When they start buying, the stock prices rise sharply and when they sell the fall also will be equally sharp.
Several hedge funds are understood to have started investing in liquid stocks in the last few months through FIIs sub-accounts and participatory notes.
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