SEBI has recently banned 39 entities from the market, for indulging in circular trading in Spectacle Infotek, Goldstone Technologies, Gemstone Investments, LGS Global and Well Pack Papers & Containers. This is indeed a praiseworthy move, though belated, as price movement or rigging had happened between 2008 and 2010. Due to this action, all these 5 stocks have been ruling weak for last couple of days, as also, many such stocks suspected to have been involved in price rigging by the operators, have also been ruling weak.

Though some of the companies banned are having market capitalization of less than Rs. 25 crore, even larger ones are having market cap of around Rs. 100-150 crore exist. Infact, operators play in the market with nick name and some code names. SEBI has found 196 members playing in the name of Walmiki - Shah Group while 43 members were found playing in the name of Pabari – Parikh Group, of which 39 entities were found as core members.

We have analysed this story and have tried to identify some of the rigged stocks out of recent IPOs, as also some companies still seen active, where funding seems to have come from listed NBFCs and broking companies, to the operators and players involved in price rigging. We have also given some features of these stocks as also motive behind this move of price rigging.

Infact, the features and objective of such price rigging is seen to be as under:-

·         Trend started with weak IPO stocks

·         Resorted to bonus issue and split

·         Made big announcements of order receipts, acquisitions, especially on the global front

·         Seen listed NBFCs and Investment Bankers in collusion with the operators

·         Listed NBFCs have brought these stocks on approved list to facilitate funding to the operators and holding these stocks in their name to hide the identity of operators

·         Objective was to keep market cap / share price high, to facilitate QIP/Preferential allotment or to improve net worth of promoters

·         Even HNIs/Value Investors seen indulging in this rigging – either knowingly or unknowingly

·         Presented fictitious and rosy financial results, even by paying tax on such overstated income

·         Top houses have seen hiring these operators, largely to maintain share price, with regular purchases made by them, as Benami for them

·         Many such companies are in gross violation of creeping acquisition route, as more than 5% has been acquired in a year by Benami or by Promoters

Some of the IPOs having tapped the capital market in last couple of years have seen such activities, which are listed below with "Peak and High" written against some stocks, where activity is still seen at its high and price ruling beyond its fundamentals. They are:-

* Prices as of 3-Feb-11

Some of the stocks where we have seen huge price volatility and manipulation are given under. We have deliberately not stated the names of the operators, (though they were collected by us) for obvious reasons. However, the list of these 15 shares is just an indicative list, which covers various types of methods by different companies. Infact, there are over 200-250 companies been identified by us, witnessing activity of price rigging.

* Prices as of 3-Feb-11

In the past, we have been regularly and proactively been cautioning our members through our columns New Issue Analysis (IPO) as well as Market Whispers against such spurious stocks. Also, we have warned viewers on TV channels CNBC-TV18 and CNBC Awaaz to beware of such stocks.

We hope that this will educate the traders to atleast remain away from such stocks and avoid getting lured towards them. Future is bleak for such stocks, as also of the operators and manipulators.