Economy

List of stocks on SEBI’s ‘monitor list’ was leaked, suspect traders

PALAK SHAH Mumbai | Updated on June 05, 2018

Share prices of over a dozen stocks on ASM list fell before May 31 announcement

Was a list of stocks that were to be included in Additional Surveillance Measure (ASM), the new category formed by SEBI to check market manipulation, leaked to operators ahead of its official release? A section of stock market brokers and top traders suspect that operators in Mumbai and Gujarat may have had access to the list on May 31 before it was officially put up on stock exchange websites.

The share price of more than a dozen stocks, including top-traded group ‘A’ counters, which were part of the list, fell sharply before it was announced they were being put in the ASM category. In fact, according to sources, the list was put up on only after the closing of market hours on May 31.

Curiously, the Sensex and the Nifty rose more than 1 per cent and the broader market was fairly stable.

Stocks that crashed

Among the stocks that fell on May 31 were Bombay Dyeing and Mfg Co (which crashed by 11.07 per cent), Fineotex Chemical (10.95 per cent), Dilip Buildcon (9.05 per cent), Butterfly Gandhimathi Appliances (5.86 per cent), Uniply Decor (4.97 per cent), Man Industries (3.36 per cent), Excel Industries (3.25 per cent), Radico Khaitan (3.15 per cent), India Glyscol (3.07 per cent), Rain Industries (2.5 per cent) and Forbes and Co (2 per cent). These were among the 37 stocks on the ASM list.

According to stock brokers, the operators targeted stocks that had high volumes so they could cover their short positions comfortably at day’s end. Owing to this short covering, the share prices recovered somewhat from their day’s low. A probe will reveal that higher-than-normal volumes were traded in some of these counters on May 31.

SEBI probe sought

“There are rumours of a leak of the ASM list. SEBI should probe the May 31 trades in stocks that were part of the list as this is a case of a leak at its own doorstep or that of the stock exchanges,” said a promoter of one of the oldest brokerage houses in Mumbai. “The leak of the ASM list is as notorious as the WhatsApp case. Most stocks on the ASM list fell before the announcement was officially made.”

SEBI introduced the ASM this year in consultation with exchanges as part of enhanced surveillance mechanism. It follows simple criteria such as price volume spike to put stocks under watch. The stocks being moved to this list attract a negative bias: those trading in them have to deposit 100 per cent margin, and these counters attract strict 5 per cent circuit filter. Such criteria makes it difficult for traders to exit the counters; hence an announcement like the ASM list is crucial market information, which sellers can use to their advantage. In the cash segment, short-sellers can either borrow shares to give delivery or are required to square off their positions the same day.

Asked about the exact time when the ASM circular was uploaded on the exchange websites on May 31, the BSE said, “BSE uploads various circulars throughout the day including during the market hours & post markets hours.” The NSE did not respond to the email query; SEBI too did not respond when asked if it was aware of the leak.

Published on June 05, 2018

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