RPG Group Chairman Harsh Goenka fears that the era of malpractices reminiscent of the Harshad Mehta/Ketan Parekh scam incidents are resurfacing amid a bull run in the stock market. The RPG Group Chairman feels that the problem is more visible in Kolkata. Goenka also urged SEBI and Finance Ministry to step and investigate.
“With a booming stock market, all the malpractices of Harshad Mehta/Ketan Parekh era are back primarily in Kolkata. Promoters are inflating profits (through profit entry) and in nexus with Gujarati-Marwari brokers driving their stock prices to unrealistic levels. It’s time for SEBI, Finance Ministry to step in and investigate before small investors suffer severe losses,” Harsh Goenka wrote on X (formally Twitter).
Goenka’s tweet became a major hit with the users agreeing with the RPG Group chairman’s viewpoint.
“Mostly the major Steel houses. One of them saw their shares zoom close to 30x in last one year to 1000+ levels,” wrote one user to which Goenka agreed. Many others also raised concerns of small investors getting burnt in case of a possible meltdown.
The benchmark indices took a severe beating on May 3, falling over 2 percent from day’s high, baffling investors. The selloff was so broad-based that two of every three stocks on BSE were trading in the red and nearly 247 exchange-listed stocks had hit their respective lower circuits, with investors losing Rs 3.21 lakh crore, according to fall in the BSE market capitalisation.
On May 3, Sensex fell from the day’s high of 75,095.18 to a low of 73,637.38, down by 1,457.80 points. Nifty, which hit a fresh record high of 22,794.70 was last quoting at 22,416.50, down by 1.02 per cent
Ketan Parekh Scam
It was one of the most significant stock market frauds, leaving a lasting impact on investors and regulators like the Securities Exchange Board of India (SEBI). Parekh earned a god-like status among many investors with a modus operandi that allowed him to achieve returns multiple times higher than annual stock market returns. Within two years, he deceived numerous investors, banks, and the stock market.
Parekh’s method of operation revolved around manipulating stocks in sectors such as Information, Communication and Entertainment (ICE) during the dot-com boom of 1999 and 2000. This period allowed him to validate his predictions to many investors, including investment firms, overseas corporates, banks, and businessmen from listed companies, who entrusted him with their funds.
Parekh orchestrated his trades using the Kolkata stock exchange where rules and regulations were less stringent.
Harshad Mehta Scam
In the early 1990s, the The Harshad Mehta scam was one of the most infamous financial scandals. Mehta, a stockbroker, exploited loopholes in the banking system to manipulate the market. He was charged with a practice known as “stock price rigging” where he artificially inflated the prices of certain stocks, creating a buying frenzy. Mehta’s actions led to a massive rise in the Bombay Stock Exchange (BSE) index.
When the scam unfolded it lead to a significant crash in the stock market. The fallout revealed systemic weaknesses in the country’s financial regulatory framework and resulted in reforms aimed at strengthening oversight and transparency in the securities market.
