 TEAM MEMBERS

FMI  SINAL PANCHOLI – F2021058

Presentation  SIVA SAI TEJA ALLAKA – F2021059
 SRISHTI PANDEY – F2021060
Ketan Parekh
Scam
What was Ketan Parekh Scam all about?

 Former stockbroker from Mumbai

 popularly known as Pied Piper of Dalal Street ‘Penta four Bull’, ‘KP’, 'One Man Army’.
 Trainee of Harshad Mehta
 Ketan Parekh used to attract Institutional Investors because they invest in big amounts. He
mainly used pump and dump & Circular trading mechanism to attract institutional investors.
 Traded from Calcutta Stock exchange because of less regulations compared to other stock
exchanges.
 Madhavpura Mercantile Co-operative Bank used to issue Pay Order which was deposited in
Bank of India.
 He inflated the top 10 stocks popularly known as K-10 (Information, Entertainment sector.
Amitabh Bacchan Corporation, zee etc)
Mechanism
 Pump and Dump:
 involves buying shares of a company in huge quantities, and by giving false
information, attracts several investor.
 When these investors get trapped in the false show of brokers, they start
buying these shares, eventually led increase in the share price- Pumping of
Price.
 He used to buy in large quantities leading to increase in price. Investors used to
think Company is performing good and they also used to buy shares leading to
increase in demand and price. At this time, Ketan Parekh used to exit from
these shares earning profit and leading to decrease in price.
Cont.…

 Circular Trading:
 operators do trading among themselves, like the 1st operator sells the share to
the second operator, 2nd to the 3rd one and so on.. Which increases the
volume of the stock as the operators are trading themselves.
 Ketan Parekh used to sell his shares of own company and increase volume of
the stock.
 Because of high volume, those stocks could be seen trading actively which was
giving an impression that investors are taking interest in that stock
Impact on Financial Markets
 One of the biggest fall in BSE – 700 points
 New Overseas Corporate Bodies – SEBI investigated and revealed 29 billion was
transferred out of the country through five Overseas Corporate Bodies between
March 1999 to  March 2001
 Bank of India – Worst hit, cashed 137 crores fictitious pay orders issued by
Madhavpura Bank  led to arrest Ketan Parekh
 Global Trust Bank - Global Trust Bank was on the verge of getting merged with
UTI Bank
 Bombay Stock Exchange, Calcutta Stock Exchange
 Co-operative banks - nationalized banks and money market intermediaries have
reportedly stopped dealing with co-operative banks
 Unit Trust of India - stands at less than one-fifth of its value
Steps taken by SEBI after the scam

 SEBI launched immediate investigation on the scam

 Circular Trading was cut short from a week today.
 The control that brokers had over stock exchanges was withdrawn.   
 SEBI also banned stock exchange trading by presidents, vice-presidents
and the treasurers.
 RBI started inspecting accounts and sub-accounts twice a year despite
once in two year
 SEBI allowed banks for collateralized lending only through BSE and NSE
THANK YOU