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BY

SANJAY BARICK
REGD.NO-0941333222
WHO IS KETAN PAREKH ?
Popularly known as Bombay Bull.
Certified chartered accountant.
NH securities started by his father and managed
by him.
KP had a good relation with global corporate
giants and actors.
KP arrested on 30 march 2001 for the security
market scam known as Ketan Parekh scam.
He was punished one year jail and banned from
brokering job till 2017
Scenario of scam
Bombay Stock Exchange (BSE) President Anand
Rathi resigned.
Eight people were reported to have committed
suicide .
Hundreds of investors were driven to the brink
of bankruptcy and two banks also.
The Sensex lost over 700 points and more than
500 of the 1364 actively traded shares


KPs research findings
Infotech, communication and entertainment.
Low liquidity shares of less volume of capital.
KP-10

KP-10
Amitabh Bachchan Corporation Limited (ABCL)
Mukta Arts
Tips and Pritish Nandy Communications
HFCL
Global Telesystems
Zee Telefilms
Crest Communications
Penta Media Graphics
New Overseas Corporate
Bodies(OCB)
The Securities and Exchange Board of Indias
preliminary investigation in May revealed that Rs 29
billion was transferred out of the country through
five Overseas Corporate Bodies between March
1999 to March 2001. These OCBs had together
invested just Rs 7.77 billion in the Indian market
but remitted a whopping Rs 36.77 billion out of the
country. This direct flight of capital occurred
through European Investments, Far East
Investments, Wakefield Holding, Brentfield Holdings
and Kensington Investment. Three of these
companies have a paid up capital of just $ 10.

Scam mechanism
Artificial rigging.
Though the price of shares depends upon
the basic two economic factor demand and
supply, an artificial demand was created
through continues investment.
Scam on light
Even before the Parekh scandal broke out, the stock
markets had been witnessing turbulent times across the
country. The Calcutta Stock Exchange (CSE) was the first
to make news after Abhishek Banka committed suicide
on March 19 after reportedly losing money in the
market. His wife, Sona followed suit, days later.
Subsequently, the BSE witnessed a series of Black
Fridays. On February 16 (Friday), the Sensex fell 106.67
to close at 4330.32 and then on February 23, it further
plummeted by 140.39 points to close at 4122.16. All
Fridays in the month of March saw a decline in the
market. March 2, 9, 16, 23 and 30 all witnessed decline
in points of 176.49, 174.98, 74.12, 78.69, and 147.18
respectively. Clearly something was wrong with the way
things were being run
Steps taken by SEBI after scam
SEBI launched immediate investigation on the
scam.
The SEBI has also imposed volatility margins on
net outstanding sale positions of FIIs, financial
institutions, banks and mutual funds.
SEBI banned naked short sales. In simple words,
it means that all short sales have to be covered
by an equal amount of long purchases.
RBI started inspecting accounts and sub-
accounts twice a year in spite of once in two
year.
IMPACT ON FINANCIAL
INSTITUTIONS
Bombay Stock Exchange
The Bombay Stock Exchange witnessed one of
the worst bear runs leading to a 177-point
crash on 2 March 2001.
On 23 May, the BSE announced the launch of
trading in index options in the first week of
June, based on the European style. For this
purpose, the exchange has joined hands with
the Chicago Mercantile Exchange to adopt its
system of calculating margin requirements and
managing risk, known as Standard Portfolio
Analysis of Risk (SPAN).

In fact the 177-point crash on 2 March 2001
was triggered by the payment crisis at Lyons
Range (CSE) and Dalal Street (BSE). While
investors were still trying to digest the shortfall
of Rs 100 crore for the settlement ended 1
March on the CSE, the market was gripped with
rumors' of a fresh payment crisis on CSE for the
following settlement ended 8 March. Although
the CSE authorities denied the payment crisis
initially, SEBI went ahead and suspended 40
brokers on CSE
Calcutta Stock Exchange
NEDUNGADI BANK
After the Ketan Parekh bubble burst in 2001,
the RBI suddenly swung into action and began
to go through Nedungadis books with a
toothcomb. Punjab National Bank took over the
bank that was up for sale after RBI initiated the
move to weed out the broker promoter Rajendra
Bhatia from the bank.
GLOBAL TRUST BANK
Ramesh Gellis search for high returns took the
new generation private bank to the stock
market, where its involvement in the speculative
activities associated with the Ketan Parekh scam
and its high exposure soon resulted in
substantial losses. This led to the exit of
Ramesh Gelli in 2001. Eventually, Oriental Bank
of Commerce (OBC) took over the troubled
bank.
Madhavpura Mercantile Co-
operative Bank
Ketan along with his associates also managed
to get Rs1,000 crore from the Madhavpura
Mercantile Co-operative Bank.
which had collapsed and caused thousands of
depositors to lose money
State Bank of India
However, this time, SBIs losses are restricted to
about Rs 40 crore, lent against pay orders
issued by Ahmedabad based Classic Co-
operative Bank. According to bank analysts
polled by Capital Market, this is loose change
for the bank of its size
Bank of India
Of the five banks hit by pay order defaults, Bank of
India has unfortunately been the worst hit. It cashed
Rs 137-crore fictitious pay orders issued by the
Ahmedabad based Madhavpura Bank to arrested
broker Ketan Parekh. The banking sector is
estimated to have taken a hit of more than Rs 1,000
crore due to the pay order scam indulged in by
many Gujarat co-operative banks.
It was Bank of Indias complaint to Central Bureau
of Investigation that resulted in Parekhs arrest on
30 March 2001.

others
Many mutual fund institutions, like ICICI,
UTI..etc also have loosen due to invested in KP-
10 securities.



Thank You