‘Invisible hands’ propping up share price perplexes promoters

Promoters are often accused of insider trading, circular trading and price manipulation. However, a couple of recent developments raised eyebrows from the investment circle and turned out to be a big talking point on social media.

On October 10, BSE and the National Stock Exchange sought clarification from Premier Polyfilm with reference to significant movement in the company’s price, “to ensure that investors have the latest relevant information about the company and to inform the market so that the interest of the investors is safeguarded.”

In a reply to the exchanges, Premier Polyfilm clarified that there was no price-sensitive information with the company that had not been disclosed to the stock exchanges. Moreover, the company is yet to approve and announce its financial results for the quarter and six months ended on September 30, 2023, it said. In addition, recently no announcement has been made by the company/management/promoters about change in profitability/sales and/or book order position of the company, it further clarified.

“We have also noted that there was a substantial change in the price and volume of shares of the company in the recent past,” the reply said, adding that “Now, we request you to look into the reasons for the sudden rise in prices and volume of share of the company at your level and take action accordingly. This will also be in the interest of investors and promoters. In the event, if you come across any reasons which can jeopardise the interest of the investors or the company, kindly caution us.”

Similarly, a few days back a company suo motu wrote to the exchanges asking them to probe its share price movement. It said there was no logic behind such a price rise and hence the probe is sought.

Clarification notices

Exchanges send clarification notices to the companies in cases where there is a spurt in price and/or volume without any major corporate announcement and the reply is then disseminated to the market. The aforesaid process is carried out based on pre-decided criteria and in coordination with SEBI, exchanges said.

Almost 90 per cent of responses from the companies are standard ones like “we have intimated to the stock exchanges of all events and information that may have a probable bearing on the operation/performance of the company including all price sensitive information, as and when required from time to time.

The company does not have any undisclosed/potentially price-sensitive information/event/announcement to be shared with the Stock Exchanges.”

Advanced tools

This initiative was, however, introduced when the exchanges did not have any technological tools to track the share price movement. With so much technological advancement these auto-generated messages can at best be given a quiet burial. With artificial intelligence and other advanced tools at their disposal, exchanges now can access the trail of each trade and track down the pump-and-dump perpetrators/manipulators. With hard proof, exchanges can punish them legally.

Besides, with the recent initiatives such as additional Surveillance Measures and Graded Surveillance Measures, in addition to circuit filters and trade-for-trade frameworks, exchanges have already tightened the noose. 

However, checking on rumours/articles appearing in various media reports that have a significant impact on the prices/volume of the security, can be continued.

But, the solution to all this lies with investor education, which exchanges, SEBI and other intermediaries such as mutual funds and brokerages are currently doing efficiently.