ITC – The FERA Violation Controversy

In the last quarter of 1997, ITC’s share price underwent dramatic ups and downs. In October, it reached a high of Rs 652.90. Later, it fell by more than Rs 100 to Rs 525. It increased again the November to Rs 601.50 after reaching a low of Rs 488.30. In December, it zoomed to Rs 648 and then touched a low of Rs 526. ITC’s half-yearly results were announced on 21st November 1997. On 20th November, the share price increased from Rs 489.70 to Rs 505.40 on the NSE and from Rs 492.25 to Rs 506 on the BSE. A whopping 28.7 million shares changed hands on the NSE while the BSE reported 11.1 million share trades, the highest ever in the history of ITC’s stock.
In the second week of November 1997, the Kerala High Court ordered the CBI to investigate a transaction involving ITC shares, based on a petition filed by a Kochi based investor. According to the investor, when the market had reopened for trading at 1200 hrs on Thursday, the 6th of November, it was found that a transaction for 100 ITC shares had been entered on the NSE at the rate of Rs 615 per share when the market price was only Rs 558. By recording the transaction at the rate of Rs 615, interested parties had apparently attempted to ward off the selling pressure on the scrip. Following these incidents, The Securities & Exchange Board of India (SEBI), decided to conduct detailed investigations. href = "mk3g2.htm"href = "mk3g3.htm" Though these investigations failed to produce concrete evidence of ITC’s involvement in insider trading, there were widespread speculations about ITC’s hand in the volatile share price movements.