Firms seeking legal advice to challenge the order.
Mumbai, Dec. 3
Following SEBI's order prohibiting Ackruti City, Welspun, Brushman and Murli Industries as well as their promoter entities from participating in the stock markets, the share prices of these companies took a beating.
Two of the stocks hit the lower circuit on Friday, one of them losing close to 27 per cent in the day's trading session.
The scrips of Ackruti City and Murli Industries each fell by 20 per cent. Ackruti closed at Rs 307.90 (down by Rs 76.95) and Murli Industries at Rs 70.85 (down Rs 17.65). Welspun Corp saw a drop of 27 per cent or Rs 58.80, to end the day at Rs 160.30.
The companies have responded to the SEBI order. Welspun Corp's statement said: “We strongly deny any direct or indirect involvement in any price manipulations that has been alleged. Welspun group is based on strong ethical practices and sincerely practice transparency in all its operations. We always strive to be in full compliance. We are consulting our legal counsel and will challenge the SEBI order on an appropriate platform.”
Ackruti City also put out a statement saying that it will take legal advice and challenge the order.
Result of initiative
The order is part of the capital market regulator's larger initiative to improve corporate governance standards prevailing in the market today.
“The transparency of Indian companies has improved over time. Regulators have been monitoring these companies well. However, it will take some more time for the system to show higher improvement in transparency and corporate governance,” said Mr Jagannadham Thunuguntla, Head of Equity, SMC Capital.
Analysts believe that it's too early to comment on the future of these stocks. However, these stocks will continue to face uncertainty in the days to come.
“If you have been caught doing something wrong, you will have to pay for it. If we look at these companies' stock history you will see that stock prices and the volumes went up in the time period that they have been accused of wrong-doing. So, there is certainly something wrong here,” said Mr Arun Kejriwal of Kejriwal Research & Investment Services.
“Also, history shows that once you are involved in a mess, it's hard for you to get out.”
Analysts say that there is a bigger issue that needs to be addressed here, of whether this is a one-off case or happens everywhere.
“People will be cautious about these stocks in the days to come. The real question, however, is whether this is the only case of its kind or is a more frequent occurrence in the industry,” added Mr Kejriwal.
The SEBI order's ruling regarding the futures and options positions of these companies has been viewed as fair by the analysts.
The order allowed the current futures and options positions of these companies to be squared off while barring any further positions from being taken.Related Stories:
SEBI's order seen as a investor protection move