Beware the online bears!


As an investor and also a speculator I have seen for years how the unscrupulous few make the markets move to profit for themselves.

And now technology has made these creatures move online, more dangerously. I first saw it happen over a year ago when Educomp got battered to lose half its value in two weeks by what was proven to be unfounded anonymous allegations. But the stock later recovered to almost twice its pre-rumour levels. Someone must have made a lot of money indeed. On both swings.

Maybe it’s the same creatures who got to work yesterday on the ICICI Bank stock. Except this time the company was a lot more vigilant – and a lot more quick to act.

Look at the chain of disclosures and actions yesterday:

1. Someone posts a message in a widely followed internet message group that there was a $1 billion suit against ICICI Bank in the US.

2. The stock starts losing value – and eventually is down 5%.

3. But this time there’s a difference. The company is quick to react. First, they deny that any such lawsuit exists.

4. Then they go after and find the person spreading the rumour – a certain Nirav Oza - and they hand him over to our police. Under questioning, our Mr. Oza first claims that his email was hacked by someone who sent out the message but later relents and posts a message back to the group saying that there was no lawsuit.

5. Another chain of emails urging a sell on the stock is traced to a gent called Hiten Sampat – Vice President at OHM, a stock broking firm. On questioning, he claims he picked up the news from a blog post by a person called “Rahul K” who is apparently based in Bombay and works in a manufacturing company.

6. This particular “Rahul” in turn claims his news came from some unknown Hedge Fund Manager in the US, who strangely cannot be traced or named.

7. All this while the stock is see-sawing. It has lost 5%. But the company’s clarifications and quick action seem to be working – the stock starts moving up.

8. ICICI Bank gets the Mumbai Police, SEBI and the EoW involved against the rumour-mongers.

9. Suddenly knowledge about a perhaps-fictional Hedge Fund Manager refuses to surface. And given that there is no other record of any lawsuit, the rumours begins to fizzle.

10. And the stock begins to sizzle again – and by the end of the day, it had gained 6.5%

11. Somebody made a lot of money here, and somebody lost a lot of money.

In all of these shenanigans I always say one thing – to find who is doing it, follow the money. Who made the most when the price dropped? Who made the most when it gained big again? I hope SEBI questions them. It’s time these shadowy players were brought out into the open.

Once upon a time, it was hard to pin the source of a rumour. Today is the day of the online-trackable society. And rumours and their originators are soon outed.

The newspapers reported it today: and and

But that’s a day after all the drama was over. Perhaps a day too late!

We live in wonderful digital times. I am seeing an entirely new style of online monitoring and supervision by companies that care for what their investors think. I’m usually against Big Bother- but this time, I think online stock market rumour supervision is a good thing.

If you’re an investor tread carefully. Don’t jump on to rumours unless you know there is a clarification. And go online and get your clarification. Then and only then make your move.

Leave the rumour-mongers to be outed in public like they deserve to. These are fun times we live in!