Insider trading in Ispat Industries?

Don’t expect an investigation by the regulator, much less any indictment, but insider trading in Ispat counter was telltale

The shares of Ispat Industries climbed over 10% on Monday—well before the deal between JSW and Ispat was announced. But Monday was the last stage of the rally, propelled by massive insider buying. For days together the counter of Ispat Industries was abuzz with huge volumes and sharp rise in prices. Did people close to the deal, have definite information that something conclusive was afoot? It would seem so from the stock price movement.

Look at the facts. On 9th December, the Ispat stock was languishing at Rs17.80. The next day, the scrip shot up to Rs18.80 a rise of 5.3% on large volumes. On 13th December it jumped up again by 4.81%. The following day, when the broader market was struggling, Ispat was up further by 5.3%. On 15th December, a large number of stocks dipped, but Ispat stayed up. On 16th December, the Ispat stock shot up again by 4.5%.

Yesterday, it was sharply up since the morning as the buzz went around of a possible takeover by JSW. But, up until yesterday, there was absolutely no news and so no reason for such consistent, forceful buying in the stock on ever-larger volumes, for six consecutive days. In short, there was much insider trading.

As we have pointed out regularly in the ‘Unquoted’ section of Moneylife magazine, there is rampant manipulation going on in small Indian stocks. What is amazing, however, is how virtually every large takeover is also accompanied by massive price movements some days before the deal. Clearly, those in the market have little to fear about being caught. At least, not yet.

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