BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Friday, 9 March, 2001, 10:41 GMT
Payment scandal jolts Indian stocks
The Bombay Stock Exchange
Stocks on the BSE plunged by 5.8% on news of defaults
Possible payment defaults by brokers on the Calcutta Stock Exchange have pushed Indian stocks into a free-fall.

India's benchmark index on the Bombay Stock Exchange (BSE) plunged as much as 5.8% on Friday.

We are expecting more payments to come. So we will know only on Saturday whether there is actually a payments default

Tapas Datta, Calcutta Stock Exchange
Deepak Mehta, a local broker, said there had been panic selling.

"There is a large selling pressure... The fall is all-round," he added.

Investors are concerned that any payment default could prompt a wave of major losses at brokerages across the country.

There are also fears that a shortfall of funds could spill over onto other stock exchanges as well.


The Calcutta exchange was hit by a default of 960m rupees ($20m, 14m) after three brokers were unable to settle their trades, according to the local business newspaper, the Economic Times.

The exchange was due a total of 3.5bn rupees ($75.3m, 51.24m), the newspaper said.

A bank holiday in Calcutta is adding to the uncertainty
Bourse officials, however, maintain that there is merely a delay in payments rather than a technical default.

The executive director of the exchange, Tapas Datta, said it will not be known until Saturday whether any brokers have defaulted.

"We are expecting more payments to come. So we will know only on Saturday whether there is actually a payments default," Mr Datta told CNBC television.

"Right now what is happening is a postponement of the pay-in."

Tracking the shortfall

The tracking of payments has been delayed because Friday is a bank holiday in Calcutta. This has added to uncertainty in the markets.

Mr Datta also stressed the exchange had enough funds in its settlement guarantee fund to cover any shortfalls.

The guarantee fund contains 5bn rupees.

Gul Teckchandani, chief investment officer at Sun F&C Asset Management, said: "The magnitude of the problem is not known as information flow is still incomplete, but hopefully it will be less than we think."

Mr Datta also named some of the brokers having problems.

Insider trading scandal

India's stock markets are already reeling from reports of an insider trading scandal at the Bombay Stock Exchange.

On Thursday the BSE accepted the resignation of its president Anand Rathi, following allegations that he had leaked market-sensitive information.

Over three trading sessions at the end of last week, the Bombay market lost nearly 9%.

The plunge contrasted with a trading peak last Wednesday following the release of what was seen as a market-friendly budget in India.

The BSE is also known as The Stock Exchange, Mumbai.

Search BBC News Online

Advanced search options
Launch console
See also:

08 Mar 01 | Business
Bombay stock exchange chief quits
05 Mar 01 | Business
Bombay market losses probed
25 Feb 01 | Business
Air France abandons India bid
12 Feb 01 | Business
Nasdaq targets India
16 Oct 00 | South Asia
India shrugs off growth fears
19 Sep 00 | South Asia
IMF bullish on India
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories