Ketan Parekh and the 2001 Market Manipulation

How broker Ketan Parekh manipulated a group of technology and media stocks in the dot-com boom using bank funds, and how the scam led to reforms like rolling settlement.

In 2001, another market scandal emerged.

The scheme

Broker Ketan Parekh concentrated on a group of stocks, called the “K-10”, mostly tech, media and telecom companies.
He used funds from banks like Madhavpura Mercantile Cooperative Bank and companies to push up prices through circular trading.

The bust

When the dot-com boom ended and bears sold aggressively, prices crashed in March 2001.
Madhavpura cooperative bank collapsed.

Reforms

Rolling settlement replaced weekly settlement, cutting speculative carry-forward.
Badla (carry-forward trading) was banned.
Stricter limits on bank lending to brokers.

Punishment

SEBI barred Parekh from markets for years.

Lesson

Manipulation thrives on easy credit and weak settlement systems.

The K-10 stocks

A small software company's shares soared many times in months, not because of profits, but because of concentrated buying.

Thinking every stock rally reflects real value

Some rallies result from manipulation.

Key takeaways

Ketan Parekh manipulated the "K-10" stocks around 2001.
Bank and corporate funds fuelled circular trading.
Madhavpura cooperative bank collapsed.
Rolling settlement and a badla ban followed.