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Ketan Parekh
Sat Jun 5, 2021
Ketan Parekh is a former stocks broker from Mumbai, who was convicted in 2008, for involvement in the Indian stock market manipulations scam from late 1998 to 2001. During this period, Parekh artificially rigged prices of specifically chosen securities (informally referred to as K-10 stocks), using large sums of money borrowed from banks including the Madhavpura Mercantile Co-operative Bank, of which he was a director. As a result, he was banned from trading in the Indian stock exchanges till 2017. Having his conviction from the transaction entered with Canara Bank in 1992.
Early Career
Parekh, a Chartered Accountant, started his career in the late 1980s at Narbheram Harakchand Securities (NH Securities), a reputed institutional brokerage firm. In the 90s, he contacted Harshad Mehta, a well-known stockbroker, and subsequently joined Mehta’s firm Growmore Investments, a firm that Mehta had set up and involved in the 1992 Indian stock market scam. Though he was engaged in Growmore’s cons, Parekh was never convicted in them. Unlike Mehta, Parekh ensured that he remained low-key, with a simple lifestyle thus presenting a humble “feet-on-the-ground” demeanor even when interviewed by journalists like Sucheta Dalal, as she related in her 2003 article in Rediff.
However, this started to change in 1999-2000 as Parekh got closer to celebrities. Parekh began cultivating friendships with Bollywood Family, including Amitabh Bacchan and the diamond merchant Bharat Shah, thus coming into the media’s eye and limelight. These newly formed relationships led to an investigative story on him, first published on 25 August 2000. This Story covered a millennial bash that he had given at his palatial bungalow at Mandwa (near Mumbai), which was attended by Mumbai’s glitterati, industrialists, and media personalities, which was followed by his acquiring expensive luxury cars including a Cadillac, throwing regular high profile parties that were eagerly lapped up by the tabloid press. His pictures began to appear in newspapers with his comments on matters related to finance and the budget. The media covered every incident in his life, including forming KVP Ventures (a collaboration with Vinay Mallo and the Australian magnate Kerry packer), an investment bank (Triumph international), and turning the loss-making ABCL into a profitable firm by arranging to fund from HFCL. He invested heavily in stocks related to IT, media, and communication and propagated them. As cover stories emerged in the press of his malpractices related to the stock market, scrutiny shifted to his activities leading to his arrest on 30 March 2001.
Role in the 2001 stock market crash
Ketan Parekh purchased large stakes in less known small market capitalization companies and jacked up their prices through circular trading with other traders, and collusion with these companies and large institutional investors. This trade resulted in steep hikes in share prices (for example shares of Zee telefilms zoomed up from ₹127 to a stock price of ₹10,000. This set of ten stocks was colloquially referred to as “K-10” stocks and Parekh was playfully referred to as “Pentafour”.
It later transpired that promoters and industrialists often gave Parekh funds to rig up their share prices artificially. Thus in just a few months, scrips of virtually unknown companies like Visualsoft rose from ₹625 to ₹8,448 per share, and Sonata Software rose from ₹90 to ₹2,936.60. However, the bear cartel in the Bombay stock exchange started to hammer his K-10 stocks in February 2001, leading them to fall and precipitate a Kolkata payment crisis.
On 1 March 2001, just after the Indian Union Budget had been presented, the BSE Index crashed 176 points, prompting the NDA government to inquire into the market reaction. Subsequently, the RBI refused to clear pay orders (POs) given by Parekh as collateral for loans to BOI (Bank of India), as they found them suspicious. The RBI commenced an investigation against Parekh. Around the same time, a bear cartel of brokers in Mumbai opposed Parekh's tried to dump their shares of K-10 stocks. Panicking, Parekh sold off his entire ownership of the so-called K-10 stocks that he had successfully jacked up over the past two years, especially those of two entities – GTB bank and MMCB bank. He carried out this large-scale dump in the evening, after regular trading hours, from 5 PM to midnight at the Calcutta Stock Exchange. This event resulted in a stock market crash the next day, resulting in large-scale losses for large institutional investors, including insurance companies and mutual funds.
All this resulted in Parekh’s first conviction, which carried a one-year sentence, coming from a transaction he conducted involving a unit Canara Bank in 1992.
Though Parekh was subsequently barred from stock trading, the Securities and Exchange Board of India alleged in 2009 that a variety of companies and other actors were trading on behalf of Parekh. An investigation ensued, and 26 entities were banned from trading as a result of that investigation. In March 2014 he was convicted by a special CBI court in Mumbai for cheating and sentenced to two years rigorous imprisonment.
