GTB stock movements baffles investors, regulators

Pradeep Rane
12 August 2004

Mumbai: Stock movements of the now defunct Global Trust Bank (GTB) on the bourses are baffling both investors and the regulators. The scrip has been seeing large trading activity despite the fact that it has lost its value after the bank's net worth turned negative due to unrecoverable non-performing assets.

Since the Reserve Bank of India (RBI) declared a moratorium on withdrawals on July 24 and announced the merger of GTB with the Delhi-based Oriental Bank of Commerce (OCB), over 15 per cent of the bank's equity has changed hands. The stock, which had crashed over 80 per cent from Rs14 levels to Rs2.5 since the moratorium was announced, is seeing huge volumes. Over 1 crore shares were changing hands daily in the last two weeks on the Bombay Stock Exchange and the National Stock Exchange.

The exchanges had earlier taken several steps to prevent stock manipulation, such as shifting the GTB stock to trade-to-trade category and reimposing the circuit filter on the scrip to prevent volatile trades.

The stock is also seeing volatile price movements. For instance on Monday, July 9, GTB hit the 20 per cent upper circuit at Rs3.13, while it fell sharply on Tuesday. Meanwhile the Securities and Exchange Board of India (SEBI) has launched full-fledged investigation into trading activities in the GTB stock.

The market regulator will also probe into the possibility of insider trading prior to the bank being placed under moratorium by the RBI on July 24. Sebi chairman G N Bajpai said, "We have been keeping a close watch and called for trading data from exchanges."

There were also criticism regarding Sebi chairman's decision to lift the ban on some tainted entities involved in manipulation of GTB, which was not made public.