Regulator examines PSB stock trading pattern

The Securities and Exchange Board of India (Sebi) is examining the trading pattern in the stocks of state-run banks, following the announcement of the government’s recapitalisation programme on January 25.

According to sources, the market regulator suspects price rigging by a group of investors.

On January 25, the Nifty PSU Bank index, a gauge of the public sector bank (PSB) shares’ performance, had declined 6 per cent. Sources said the government raised the issue of declining share prices of top PSBs, despite providing capital to revive growth.

When the Centre had first announced the ~2.1 trillion recapitalisation plan, the Nifty PSU Bank index had rallied 30 per cent on October

24. However, banking shares more or less remained flat between November and January.

“The finance ministry has discussed the matter with the regulator and some big brokers early this month to discover the reason behind such volatility,” a source said.

Sources added that the Centre had asked Sebi to probe the weakness in PSB stocks and whether any cartel was behind the sluggishness.

The decline in banking stocks caused a notional loss of ~427.99 billion to the government. Sources said Sebi had sought further trading details from stock exchanges.

On January 25, shares of large PSBs, such as Punjab National Bank, Bank of Baroda, and State Bank of India, had declined over 5 per cent each. Shares of smaller banks, such as United Bank of India, Central Bank of India, and Indian Overseas Bank, had remained flat.

Analysts said the shares of large banks had dropped as the recapitalisation programme was skewed in favour of smaller banks. NSENiftyPSU Bankgainers and losers State Bank of India 278.7 Oriental Bank of Commerce 104.8 Canara Bank 310.4 Andhra Bank 46.9

Punjab National Bank Bankof Baroda IDBI Bank Syndicate Bank Allahabad Bank Indian Bank Union Bank of India Bankof India

128.3 159.1 63.5 61.4 55.0 345.4 120.2 133.4

The decline in banking stocks caused a notional loss of ~427.99 billion to the government

HowPSU bankshares had reacted on Jan 25

Punjab National Bank Syndicate Bank Indian Bank

Bank of Baroda Union Bank of India

SBI

Oriental Bank of Commerce Canara Bank Andhra Bank Allahabad Bank Vijaya Bank