Wednesday, June 19, 2013

Insider Trading in Infosys?

The volume of Infosys shares traded in NSE on Friday, May 31, 2013, at 2.312 million, was twice the daily average for the year. On the same day, volumes in Infosys call options too surged and its share gained 3%, even as the broader Nifty itself fell 2.3% and technology scrips experienced a downward correction. By itself nothing unusual, except that the next day, June 1, 2013, a special board meeting was convened to announce the return of NR Narayana Murthy as the company's Chairman.

By any definition, one cannot but be convinced that this is enough prima facie suspicion of "insider trading" to warrant a full-fledged investigation by regulators and public debate by media and opinion makers. Based on all publicly available information, instead of rising, the share valuation of Infosys should have, given its recent travails, trailed those of its peers, all of whom experienced downsides on that day. It is clear that certain players had private information about a "positive" development the next day or so, which drove the surge in volumes and price. Given the secrecy surrounding the issue, it is perfectly logical to presume that only a select handful of top executives of Infosys, apart from Mr Murthy, knew this. Atleast one of them, possibly many of them, have benefited from the transactions done on May 31.

It is surprising that this has received so little attention in the media. None of the vocal television channels, some of whom are self-appointed conscience keepers of the nation, and who cry hoarse with indignation at corruption and injustice, real or perceived, have even discussed this, leave alone pursue it. But it should not come as a surprise given the kid-glove treatment of sections of corporate India, especially those involving certain individuals, by mainstream media and opinion makers. But we have lost a great opportunity to shine light and improve regulatory oversight on "insider trading", which given India's corporate culture and its pervasiveness even in more regulated markets, is certainly considerable.

It is good that this has caught the attention of the market regulator SEBI. It does not need much insight to argue that if the investigation is taken to its logical climax, some corporate reputations will bite the dust. It is also certain that efforts are already afoot to influence the investigations and limit any damage. If nothing comes out, and that seems most likely, the media cannot escape its share of complicity in losing yet another opportunity to improve corporate governance in Indian boardrooms.

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