Stock surged 2467% on no corporate news, SEBI finds

SEBI examined whether these entities engaged in deceptive trading strategies that artificially increased the stock's price and volume.

Who it concerns: The order concerns 26 individual noticees (including Usha Devi, Jagdish Chhanabhai Vaghela, Mahendrabhai Sanghvi, and others listed in the document) and one corporate entity, Sun Flower Broking Private Limited. It also references Chandrima Mercantile Limited and Mr. Hardik H. Munjpara as part of the connected group, though charges were primarily leveled against the 26 individuals and the broking firm.

What SEBI found or ordered

• SEBI found that the connected entities acted as a group using deceptive trading strategies to artificially increase price and volume.
• The stock price rose by 1392.5% from the listing price of Rs. 12 to Rs. 179.10 between August 26, 2021, and March 31, 2023.
• The investigation period was divided into four patches based on price movements and trading patterns.
• SEBI alleged that connected entities contributed significantly to positive Last Traded Price (LTP) movements, with contributions of 45.61%, 37.94%, and 39.50% in Patches 2, 3, and 4 respectively.
• Entities were found to engage in synchronized trades and circular trades, contributing to artificial volume increases.
• The order is issued under Sections 11(1), 11(4), 11(4A), 11B(1), and 11B(2) of the SEBI Act, 1992.

Also in the document

• The stock reached a high of Rs. 296.05 on November 11, 2022, which was 2467% of the listing price.
• SEBI noted that there were no positive corporate announcements to legitimize the exponential price rise.
• The entities were linked through common mobile numbers, MAC IDs, IP addresses, and frequent fund flows.
• In Patch 4, while the net market LTP was negative (Rs. -120.20), the connected entities contributed a positive Rs. 185.7 to the LTP, indicating they were driving the price during the fall.