2001: The big bull's nemesis

     Print Edition: Jan 9, 2011

Ketan Parekh was the Pied Piper of Dalal Street. The man with the Midas touch, revered by brokers and investors alike. At the height of the stock market bull run, Parekh's net worth was estimated to be anything between Rs 3,000 crore and Rs 7,000 crore. But the market meltdown in 2001, triggered by the savage global bear hammering of ICE (infotech, communications and entertainment) stocks, took the wind out of his sails. With his favourite K-10 stocks taking a pounding, Parekh was trapped, triggering off a payment crisis on the bourses. Parekh also defaulted on his payment obligations to banks and was subsequently arrested. A probe by market regulator SEBI exposed Parekh's underhand dealings with promoters and banks. Parekh borrowed from various companies and banks - who allowed him to borrow funds without proper collateral and security - to drive up stock prices. In a throwback to the Harshad Mehta scam, the broker-banker-promoter nexus was once again the main reason for the upheaval in the Indian stock markets.

SEBI cracked down despite stiff opposition from the broker community. It banned the carry-forward system, badla, introduced rolling settlement in the cash market and a separate derivatives market. The reforms have, undoubtedly, made the markets less opaque and safer for retail investors.

Fast-tracking disinvestment
It was the first sale of a controlling government stake in a big-ticket public sector undertaking. When Atal Bihari Vajpayee's government sold a 51 per cent stake in Bharat Aluminium Co Ltd to Sterlite Industries for Rs 551.5 crore in February, the Opposition accused the Bharatiya Janata Party of selling out to private interests, and worker unions protested. But the government stood its ground. The government raised another Rs 207 crore by selling a controlling stake in two other PSUs, CMC Ltd, and Hindustan Teleprinters. It also decided to sell a few other large PSUs such as IBP, VSNL, and IPCL. The pace of disinvestment, though, has slowed in recent years.

UTI facelift
India's largest mutual fund, the Unit Trust of India, got a facelift in 2001 after a crisis in its flagship scheme - the US-64 - which forced it to stop repurchase and sale of units. An expert committee later disclosed that its portfolio contained a lot of lemons. UTI subsequently agreed that US-64 will fully comply with SEBI regulations by December 31, 2002. It also agreed to set up an asset management company and revamped the UTI board to induct more professionals. All guaranteed return schemes were gradually phased out.
 
Did you know?
The acronym BRIC was coined by Jim O'Neill, Chief Economist at Goldman Sachs, in 2001 to describe the expanding footprint of emerging economies - Brazil, Russia, India, and China.

Quote of the year
We realised that traditional businesses have limited growth opportunities in the future. A conscious decision was made to invest in knowledge-based high-growth sectors.
Kumar Mangalam Birla, Chairman, A V Birla Group


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