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Sensex runs wild after SEBI whip

SEBI, THE market regulator, turned market mover on Friday. Its crackdown on big guns involved in the IPO scam ? especially the ban on Indiabulls Securities and Karvy ? sent the Sensex on a 491-point nosedive when trading opened.

india Updated: Apr 29, 2006 01:38 IST

Indiabulls spared, others to seek mercy

SEBI, THE market regulator, turned market mover on Friday. Its crackdown on big guns involved in the IPO scam — especially the ban on Indiabulls Securities and Karvy — sent the Sensex on a 491-point nosedive when trading opened.

Within an hour, the mood on Dalal Street changed. SEBI clarified that the ban would be limited to transactions of operators and was not applicable to client accounts for 15 days. More importantly, SEBI stayed its own order barring Indiabulls, one of the biggest online traders on exchanges.

The Sensex bounced back, wiping out initial losses and ending the day 17 points up at 11,851.93. SEBI's backtracking on Indiabulls had done the trick. However, collateral damage was felt elsewhere. Heads were rolling in banks and other entities named in the SEBI order. According to market sources, HDFC Bank sacked over 30 officers at the junior management level. There was no official word from the bank.

Others named in the order are scurrying to SEBI for personal hearings to clarify their respective positions. Karvy group CMD C. Parthasarathy said they would seek a hearing either on Tuesday or Wednesday. The group was the worst affected, as all its capital market arms were banned from the market till further orders. Anagram Securities would also approach SEBI.

The market — which saw the sharpest intra-day fall since May 17, 2004 — was salvaged by FIIs and mutual funds that made aggressive purchases in blue chip counters, particularly RIL, TCS, NTPC, HLL, Maruti Udyog, ICICI Bank and Bharti TeleVentures, which ended with handsome gains.

Meanwhile, market analysts have welcomed the action taken by SEBI against alleged IPO scamsters, saying it was necessary to protect the integrity of the capital market. “We understand that there seems to be a problem in IPO allocations,” said BSE member Ramesh Damani. “If there are unscrupulous elements in the market, then we should support SEBI.”

Investment adviser SP Tulsian said, if SEBI had not revised its order on Friday, there would have been a deadlock and four lakh retail investors would have been affected. “It is a big relief, but it was expected. SEBI could not have done otherwise.”

SEBI has asked clients of the banned entities to switch to new depository participants within 15 days. Investors can take a call within the period to avoid chaos in the market.

PTI adds: Finance Ministry on Friday made it clear that it will step in only if the market regulator SEBI and RBI failed to take action to prosecute those involved in multi-crore IPO scams.

“It is for regulators to take action and as owners of public sector banks, we step in only when regulators fail to move forward in prosecution,” a top Finance Ministry official told PTI. Basically, it was a regulatory issue, he said, adding it was for SEBI to go about on dealing with market manipulators.

The government will step in only when it involves top level bank officials, needing a direction from it for launching prosecution, the official said. SEBI had barred 24 key operators from operating in the stock market and banned 12 depository participants from opening fresh accounts for their involvement in major IPO scams of Yes Bank and IDFC.