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Suresh Krishnamurthy

TRADERS jacked up the price of SPIcE, the exchange-traded fund floated by Prudential ICICI, by another 20 per cent on Friday too.

If such trades confound you, then there is more. These seemingly irrational trades are not restricted to the SPIcE counter alone.

Over the past 12 months, stocks of 105 companies with negative net worth have risen in value by at least 100 per cent.

In particular, the rise in prices of companies that have reported virtually no sales, indicating no operations, during the period ended December 2004 is almost mystifying.

Barring a handful, almost all the companies in this list have reported losses or negligible profits for the period ended December 2004. The stocks, however, have still risen.

These spiced-up trades appear to be a part of a larger story of a strong rise in trading volumes in the T and Z group stocks. Trading in these groups have risen by nearly 10 times in the first four months of 2005 compared to the corresponding period of the previous year.

In the case of SPIcE, the rise comes after the mutual fund issued a press release on Thursday indicating the traded prices are way out of line with that of the net asset value per unit. The price of Rs 240 is now nearly four times its net asset value per unit.

There are many more such instances. For example, the stock of SBI Home Finance is regularly traded and on Friday it closed at Rs 20. The company has, however, virtually shut shop. It has closed down all its branches and has no employees. Its net worth is a negative Rs 230 crore but the stock is still fancied by traders.

In the past too, stocks of Nedungadi Bank and Global Trust Bank continued to trade actively even after the RBI announced a merger without any share swap. Trades continued right till the suspension of trading by the exchanges in the counters of these two failed banks.

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