Total Pageviews

Monday, June 12, 2017

Immoral and probably unlawful practices in Indian Stock Market? Should SEBI probe and investigate for the possibility of INSIDERS TRADING?

Stocks discussed here are Aurobindo Pharma (ISIN: INE406A01037) and Escorts (ISIN: INE042A01014)

One of my friends who does full-time stock trading, just placed his number on the network somewhere in the mid-April 2017, that he is looking for an advisory services. He received many calls from the firms located in Indore (MP) and Rajkot (Gujarat) while he is residing in Bangalore. Initially calls he received were about annual fees ranging from Rs. 30,000 – Rs. 50,000. He shared with me that these fees sound to be more than normal market charges. He started asking for profit sharing option whereby instead of paying annual fees and receiving no service or sub-standard service; he thought it would be wise to share his profit with the advisor. That way even advisor would be more interested to make more profit for his client. But then here there was a catch. Some people started asking him to open an account with them with the offer that de-mat account would be provided for free of cost and there would not be any annual charges. Also that advisory firm would manage trading also on my friend’s behalf. That means entrusting one’s hard earned money to someone who is staying so remote that it would be virtually impossible to hold that advisor to be responsible for the loss of money. Some firms were even went ahead to promise 100% positive return on every trade/ transaction. My friend chose not to trust these calls and kept running his business on his own independently without any outside help.

Modus Operandi:

By the 2nd week of May my friend started receiving calls from some firms in Rajkot offering advice for free. At least they claimed these to be free. And showed interest to have a long term partnership. These calls were mainly to buy a lot/ multiple lots in ‘FUTURES’ market segment of ‘ESCORTS’ and the ‘AUROBINDO PHARMA’.  These callers used to enquire about his capital and accordingly used to ask him to multiply his lots. What is most important is whenever my friend asked them about the Target and the Stop Loss, these callers would simply say just buy and hold the position. Ridiculous!!! Isn’t it? Another most important fact is that, these callers would ask him, which broker he is having an account with. And further these callers would ask him to call them back once the long position is bought in these stocks. If both of us are not wrong, it gave us a picture that these callers were having a tie up with various brokers all over the country to confirm the position bought and sold by their trapped clients (i.e. their victims). It also gave us an impression that these so called advisors would be earning commission based on the turnover they generated through various clients.

Why would these callers never induced anyone to buy shares instead suggested only a lot of Futures?
Naturally, one lot of futures means more turnover with less capital.

Now, one would like to take a look at what happened to the prices of these stocks.
With long positions accumulated from various people all over the nation, sharks were ready to take the market down to eat away people’s money.
During 8th of May to 12th of May the price of Escorts rose from Rs. 602.60 to Rs. 655.90
Whereas the price of Aurobindo Pharma went from Rs. 604.65 to Rs. 614.50
By 23rd May Escorts hit the lowest price of Rs. 595.65 in the last 30-35 days period.
Whereas Aurobindo Pharma hit the lowest price of Rs. 512.40 in the last 30-35 days period.

Can one imagine how for much money those people who had built long positions in these stocks based on those calls from con advisors, might have been robbed for? Humongous!!!

Then both stocks recovered significantly by 30th of May to celebrate 3 years of Modi Government.
Huh!!! Celebration of Modi Government by the stock market at the cost of people’s money robbed by cons. What a pity!!!!

***I would also like to add one more thing, the most people who had taken long position while stock prices plunged, might have tried to build short position to recover the lost money. And while stock prices bounce back on 30th of May to celebrate 3 years of Modi Government. Money churned? Two times humongous!!!

I’m not sure if this article is worth for SEBI (Securities Exchange Board of India) to initiate any probe into such operations in the interest of general public to promote more retail investment and the healthy operations in the stock market, or if SEBI is waiting to receive complaint in writing from those people who have been looted.

Whatever the case is, I would like to hereby appeal to the General Public and the Retail Investors in India to withdraw their investments from the Stock Market or Mutual Funds, for market is too boiled up, while underlying economic picture is not very promising!!!

Pictures below are Line charts extracted from the most popular website:

(Please click on the picture to have enlarged view)



No comments:

Post a Comment