1

Introduction
Ketan Parekh is a former stock broker from Mumbai, India

C.A by profession ,comes from broking

family background. He was convicted in 2008, for

involvement in the Indian stock market

manipulation scam in late 1999-2001 Currently he has been debarred from trading in the Indian stock exchanges till 2017. He was trainee of Harshad Mehta.
2

cont.
KP took advantage of low liquidity in certain stocks which later came to be known as K-10 Stocks.

K-10 stock
Aftek Infosys DSQ software

Global telesystems
HFCL Satyam computer Sterlite Indusries Zee Telefilms Silverline Technology Pentamedia Graphics and Pritish Nandy Communications
3

Ketan Parekh Scam

The 176-point Sensex crash on March 1, 2001

Known as 'Bombay Bull'

Prior day union budget tabled prompted 177 sensex points increase. SEBI launched immediate investigations Rs 120-crore scam at the Calcutta Stock Exchange. Accused of making brisk share purchases prior to March, 2001, through his associates Arrested on December-2,2002 in kolkata

Factors that helped KP

FUND RAISING Formed a network of brokers from exchanges like the ASE and the CSE

Purchase share in the name of poor people living in the shanty towns of Mumbai

Rs 250 crore loan from Global Trust Bank, though Global Trusts Chairman Ramesh Gelli
Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank IDBI Bank and IFCI had extended loans of Rs 1,400-odd crore to companies known to be close to Ketan Parekh KP borrowed money from various companies like HFCL and banks
5

Modus Operandi

His financing method

Bought shares when they were trading at low prices

Saw the prices go up in the bull market while continuously trading

Price was high enough, he pledged the shares with banks as collateral for funds

E.g Zee telefilms went up from Rs. 127 to Rs. 2330,

Himachal Futuristic Rs.194 to Rs 2553

Badla System:Indigenous carry-forward system invented on the Bombay Stock Exchange

Badla trading involved buying stocks with borrowed money.

The stock exchange acts as an intermediary Interest rate determined by the demand for the underlying stock Maturity not greater than 70 days

Pay order fraud

Issued cheques to MMCB drawn on BOI Went to BOI, SBI, and PNB and got pay orders discounted
7

Impact of the Scam

Immediate action by SEBI BSE President Anand Rathi's (Rathi) resignation added to the downfall The scam shook the investor's confidence By the end of March 2001

At least eight people committed suicide Hundreds of investors were driven to the brink of bankruptcy

One of the biggest Fall in BSE -700 points

The Global Trust Bank and the Madhavpura Cooperative went bust because the money they had lent to Ketan had sunk
8

Implications

BOI complains to CBI-KP is arrested Global Trust Bank and Bank of India 's merger failure SBI , PNB & BOI loss was minimal. So it did nothing MMTC bank licence cancelled KP paid its stockholders Rs.400 Crores.

SEBIS ROLE AFTER SCAM

KP and other traders were banned from trading for 17 years

The markets SEBI imposed restriction on short sales and

ordered.

Badla system was banned Options and Index Future derivatives was introduced 10% additional deposit Margins. SEBI allowed banks for collateralised lending only through BSE and NSE
10

CONCLUSION

RS. 2000 billion lost market capital KP released on bail on May 2001 All Ketan Parekh had to say was I made mistakes The Retail investors were the worst hit SBI, BOI, PNB had to suffer huge losses

MMCB also suffered huge losses

11

- A small investor hit by KP scam in April 2001

12

THANK YOU