The Hindu Business Line : SEBI to probe penny stocks movements

Mr M. Damodaran, Chairman, SEBI, at a conference on `India's Capital Market: Challenges and Prospects, New Benchmarks' organised by the Indian Chamber of Commerce in Kolkata on Thursday. - Arunangsu Roy Chowdhury

Kolkata , Sept. 8

THE Securities and Exchange Board of India (SEBI) has identified a few cases of price manipulations in small-cap stocks in the bull-run that has seen the Sensex rise to 8,000 points and beyond, according to Mr M. Damodaran, SEBI Chairman.

The securities regulator has also proposed to step up its surveillance activity on whether there has been any "wrong motive" in some quarters with regard to such stocks.

The SEBI chief's comment may be seen in the backdrop of the recent run-up of many counters, including a number of relatively unknown and illiquid ones. SEBI, however, is not willing to name the stocks that have been allegedly manipulated so far.

"We intend to find out whether a stock has shot up or has sharply declined in a manner that is questionable, without any immediate explanation. The issue is to ascertain whether there has been manipulation," Mr Damodaran told newspersons here on Thursday. SEBI will, henceforth, try to find out more on these lines, along with NSE and BSE, the two premier stock exchanges.

SEBI has further decided to establish an integrated market surveillance system. At the moment, the regulator receives information from BSE and NSE throughout the day, captured as it is on their systems. The new mechanism will throw up real-time information for SEBI, although the exchanges will continue to be the "first-level" monitoring agencies.

"The information that comes in at random during the day will now be system-driven, facilitating faster flow of information on a continued basis, without doing away with the basic responsibility of the exchanges," he added.

The regulator is also looking at the possibility of the exchanges putting together a platform (which will be commonly owned by them) to facilitate filing of information by companies.

On another front, SEBI has proposed to encourage the use of stock options, which has not found support in the desired manner, unlike single stock futures, which have been more popular with investors.

On gas find announcements: SEBI is not in a position to conduct micro management with regard to gas finds and their announcements by companies such as ONGC, Mr Damodaran told newspersons, in the context of allegations by the hydrocarbons regulator that India's largest oil producer has "rigged" stock prices through its announcements.

The market watchdog is faced with absence of a regulatory framework that deals with such disclosures and their timings, the SEBI chief said. He added that SEBI has no technical expertise to establish whether there indeed has been a gas find.

The view may be seen in the backdrop of allegations by the Director-General of Hydrocarbons, Mr V.K. Sibal, who referred to ONGC's announcement (ahead of its AGM) regarding the discovery of six trillion cubic feet of gas reserves in a Krishna-Godavari basin block. The allegation, however, has been denied by the top ONGC management.

SEBI, Mr Damodaran said, would like to see that a competent authority sets out disclosure standards with regard to such discoveries. Premature disclosure or non-disclosure could both create problems, he added.

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