Who broke the Trust? SEBI probes insider trading in GTB

When contacted, a senior Sebi official said ‘‘We are looking into the matter. We can’t tell you anything more at this crucial stage’’.

Consider these figures:

• The average daily volume in GTB shares was 1.28 lakh on the Bombay Stock Exchange between May 11 and June 11. In fact, between June 4 and 11, volumes did not even cross the 1 lakh mark.

• However, this figure shot up to 4.3 lakh between June 14 and July 23. And six days before the moratorium, the volumes shot up to a whopping 13.30 lakh (worth Rs 1.65 crore) on July 19. It was 12.82 lakh on July 20 and 11.51 lakh shares on July 22.

• Ditto for the National Stock Exchange. The average daily volume between May 11 and June 11 was 4.29 lakh. However, the average volume shot up to 15.76 lakh between June 14 and July 23. This zoomed to 43.20 lakh on June 17 and 47.8 lakh shares on July 19 before coming down to 29.6 lakh shares on July 22.

GTB’s share price also came down by 5-8 per cent every day since June 11. From Rs 17.95 on June 11, the price crashed to Rs 13.15 by July 23, indicating a fall of 26.7 per cent.

Smaller investors have suffered. Thanks to heavy offloading, the public’s stake in the bank went up from 44 per cent in March 2004 to over 51 per cent by June 2004. While figures weren’t available for July, it is learnt that the public holding in GTB crossed the 60 per cent mark by the time the moratorium was announced.

In fact, a particular OCB started dumping shares from June 14 onwards the day the RBI’s proposal for inclusion of New Bridge as the new partner for GTB was rejected by the finance ministry. Using this crucial information, which became public knowledge closer to the moratarium, this set of investors dumped almost two crore shares till July 24.

Simultaneously, there were reports that foreign investors were picking up a stake in GTB and an open offer for GTB shares was on the cards. This resulted in a frenzy among other investors to buy GTB shares.

Sebi will now ask stock brokers dealing in GTB shares to pass on the data from April 1 onwards on the buyers and sellers of GTB shares in this particular period. ‘‘We’ve already started looking into the books of brokers who were dealing in GTB shares,’’ said a Sebi source.

‘‘Why did the volume shoot up before the RBI announcement? This indicates some of the sellers had prior information about the GTB collapse,’’ says Kirit Somaiya, President of Investors Grievances Forum. The IGF has asked Sebi to probe whether 2001 stock scam accused Ketan Parekh has played any role in the recent dumping of GTB shares.

The RBI has also asked Sebi to investigate whether promoters of the bank had any role to play in the dumping of shares. Though there’s no official notification, it has asked the market regulator to scrutinise all data with the stock exchange depository and brokers.