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Thursday, January 20, 2011

Circular Trading still exists

It was the Harshad Mehata era, when we first time heard the term 'Circular Trading'.
 In circular trading, related unscrupulous entities keeps on buying and selling a particular share among themselves, with a purpose to raise the share price.

This activity lures the gullible investors to buy that particular share at higher price level, and when
Unscrupulous entities exit the share, It results  in steep price fall of the share.

Couple of days back, circular trading was seen in Shekhavati Poly Yarn ltd.
 The stock was offered at fixed price of 30 Rs.On listing it opened at 50, went to the high of 69 then corrected to close at 32 Rs.

It was amazing that the volume at the day close was around 12 crores, while the issue size of the IPO was only 1.2 crore shares. Only 4% of traded volume was delivery based.
Clearly it was a case of circular trading, where price was artificially rigged.
By the time of this post stock was trading at 24 Rs.

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