Economic Highlights

 New Delhi, 25 December 2023 

Cybercrimes Burst Stocks!

SEBI BOOKS 150 AGENTS

By Shivaji Sarkar 

The stock market behaves awry again, acting like replica of the 1992 Harshad Mehta boom-bust syndrome. It zooms and goes for “course correction”, a phenomenon the Security Exchange Board of India (SEBI) repeatedly failed to check despite its warnings.Anonymous operations on the digital and social media siphon off substantial gains, may be billions, a day. The cybercrime engulfs the stock trading and SEBI has warned people to keep off Telegram and other platforms.  

The BSE Sensex rise to 72000 before a sharp sell off on December 20 looks like myth. It calls for investigations for nabbing the people, who fled with profits and dumping Rs 9 lakh crore losses on poor mutual fund type investors. Most pension, provident and other similar funds bear the brunt. Detailed probe of the banks getting hit would bare how the country’s working class suffer. Despite some recovery next day, the overall trend is considered “subdued”. May be the market suspects some opaque operations. 

Foreign portfolio investors (FPI) sold Rs 1322 crore shares and domestic investors Rs 4754 crore, implying retail investors would have sold more. The market is likely to continue its fall for the next many weeks. 

The tanking of Nifty by 1.4 percent and Sensex by 1.3 percent is being dumped on the Singapore circulated JN.1 virus mask mandate. It may not be so. The virus threat in China has been there before the 26 rallying began on October 25, almost synchronising with the five states’ election campaigning and continued after the December 3 results. The broader markets saw a bigger fall, with the Nifty Midcap 150 and Nifty Smallcap 250 tanking 3 percent each. 

Kotak AMC Managing Director Nilesh Shah tries to lighten the bust saying that anecdotally, after a rally as long as the latest leg, markets have tended to correct. “The past 30 years have shown us that the market tends to correct after a seven-week-long rally”. A profound statement. The market players know how the bubble forms and hit various mutual type funds for scooping out profits out of poor investors’ pockets. 

The big-ticket companies such as Coal India, Tata Steel, Adani Ports and Adani Enterprises lost around 6 percent. The worst hit among the small and mid-caps are most banking-related companies - Indian Overseas Bank, Indiabulls Housing Finance, UCO Bank, IRFC, Yes Bank, Indus Towers, Piramal enterprises Indus Towers and Ratan India Enterprises - lost 7.5 percent to 10 percent. 

Some experts in the disinvestment ministry possibly could have smelt the market methods and advised the government to reduce the divestment target. No big-ticket sales are planned. It has put off stake sells in IDBI Bank, Shipping Corporation of India, BEML and Container Corporation of India. Even BPCL sales that could have fetched around Rs 60000 crore have been put off. Thaw is likely for other divestments for 2024-25 stake sales of RashtriyaIspat Nigam, Air India (AI) Assets Holding Ltd as well. Last year, Central Electronics Limited divestment was also scrapped. Some minor divestments fetched about Rs 10,050 crore against 2022-23 targeted Rs 65000 crore revised to Rs 51000 crore in the current budgetary investments. 

Still the department of investment (Dipam) is exploring possibilities of 14 transactions, Minister of State for B KishanraoKarad recently told the Rajya Sabha.The government caution perhaps followed SEBI action against manipulating agents and rising cyberattacks on the Bombay Stock Exchange, including a malware attack. SEBI Chairperson Madhavi Puri Buch says cyber risks are rising. In June 2016 it busted an alleged Pakistani-based attack on the bourse. It has acted against 46 YouTubers for manipulating stock prices in 2022. 

The system is complicated. In June 2023, the SEBI barred 135 market manipulators through an interim order. They were told to pay penalty of Rs 126 crore for making wrongful gains from stock manipulation of crore of small-cap companies. 

They manipulators engineered a mechanism that was a kind of an insider trading though technically cannot be termed so. Different share trading companies formed a cartel for selling shares of some listed companies among themselves. They jacked up the scrip prices. Together through social media and other campaigns for their chosen scrip showering ‘bonanza’. The SEBI found that these entities were manipulating shares of five listed companies -- Mauria Udyog, 7NR Retail, Darjeeling Ropeaway, GBL Industries and Vishal Fabrics. 

The SEBI says that the tricks pushed up stock prices by trading among themselves and followed it by sending purchase recommendations to the public through holding ‘online workshops’, text messages and websites. Methodology created an atmosphere of ‘mock’ education on share market and giving specific suggestions on which low-selling shares people should invest. 

There is a suspicion on the operations of various social media platforms, including Facebook conniving with the stock operators. The platforms allow linking up different systems, anonymous functioning and loot of billions. The supposed “tutors” teaching the investors never share their names, identities, address of themselves or the companies they are working for. Many agents have phone numbers of UK, South Africa and other countries. 

One wonders how Facebook type platforms keep these operations in shrouds linking up WhatsApp-Telegram and protect anonymous activities without any know-your-customer system being implemented. They work anonymously using fake sims against all rules set by the RBI and vanish suddenly. Fake job advertisements are used to lure people to their platforms. The Facebook has created a system of linking up operations on different platforms so that the perpetrators could escape police and other security nets. 

The SEBI cracked the whip on some other stock recommendations as well. In April, it barred six individuals from the securities market for one to three years for passing false tips on Telegram. 

Cyber crimes are making deep inroads and expanding to different areas rocking the economy. They have high concentration in the national capital territory of Ghaziabad, Noida, Faridabad, Nuh, and neighbouring Delhi areas. Their complex operations need difficult coordination among different states, central police, information technology and other agencies to insulate the banking, financial, stocks and various other activities. 

The situation may be worse than the Harshad Mehta scam as opacity is high. It needs crash action to bust the national and international syndicates as also to pay compensation to victims. ---INFA 

(Copyright, India News & Feature Alliance)