Prescient messages about Indian companies circulate in WhatsApp groups
MUMBAI: Three days before Dr. Reddy’s Laboratories Ltd announced quarterly results this summer, a message circulated on a private WhatsApp group saying the Indian drugmaker would not post good numbers.
Dr. Reddy’s was going to report a loss, according to the message on the ‘Market Chatter’ group, which was posted on July 24 from a mobile phone number that Reuters traced back to Nishant Vass, an auto analyst at ICICI Securities, a leading Indian brokerage.
The WhatsApp group had 45 members, mostly traders.
The loss would have been a surprise to many analysts, as consensus forecasts compiled by Thomson Reuters at the time showed expectations of a profit of 3 billion rupees.
The message proved prescient: On July 27, Dr. Reddy’s reported a loss of 587 million rupees ( US$ 9.05 million) – a result its chief executive said was “below expectations”, sending shares down as much as 4.4 per cent.
The post that circulated in the WhatsApp group three days earlier had predicted a loss of more than 500 million rupees.
A person who identified himself as Vass returned a call from Reuters using the telephone number from which the Dr. Reddy’s numbers had been posted on the WhatsApp group.
He denied writing or sharing posts in the group, adding later in a separate WhatsApp message from the same number that it was “totally baseless” that he had done so.
Reuters has documented at least 12 cases of prescient messages about major Indian companies, including Dr. Reddy’s, being posted in private WhatsApp groups.
Two of the messages appeared in the transcripts of six groups reviewed by Reuters, including the ‘Market Chatter’ group where the Dr. Reddy’s numbers appeared.
The others were shared on condition of anonymity by two other members of other WhatsApp groups.
Thepostswithprescientnumbers in the WhatsApp groups were circulated hours or days before official company statements.
The messages shared could involve lucky guesses or astute forecasts based on publ icly available information, and not all metrics shared among the 12 cases were exactly the same as reported.
Reuters could not determine where the numbers posted on the WhatsApp groups originated or whether any of the market participants who received the messages had traded on the basis of the numbers they had seen.
According to two lawyers who were formerly senior officials at the Securities and Exchange Board of India (SEBI), the country’s capital markets regulator, if any numbers being posted on WhatsApp groups were determined by regulators to be ‘ unpublished price-sensitive information’, the people circulating them would be breaking the law.
“The mere sha r i ng of information that could be unpublished insider information is outlawed, even if you don’t misuse the information to trade on it,” said Sandeep Parekh, a lawyer with Finsec Law Advisors who used to head SEBI’s enforcement division.
SEBI did not respond to requests for comment.
India significantly toughened insider trading rules in early 2015, expanding what constitutes ‘ unpublished price- sensitive information’ to include ‘ any information’ that is not ‘generally available’ and that could have a market impact. — Reuters