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Rediff News  All News  » Business » Gujarat brokers shut shop fearing payments crisis

Gujarat brokers shut shop fearing payments crisis

May 18, 2004 08:48 IST

Investors in Gujarat, who have in the past been hit by the Harshad Mehta and Ketan Parekh scams, seem to have run into another crisis on Monday as over two dozen sub-brokers downed shutters following the selloff tsunami on the bourses. 
Half-a-dozen sub-brokers in Ahmedabad and Mehsana each, four in Kheda, three in Kutch and many more in Surat, Vadodara and the southern parts of the state are reported to have downed their shutters fearing a payment crisis, and also to avoid angry investors. 
Minister of state for home, Amit Shah, assured investors that cases of brokers/sub-brokers not paying them back will be tackled sternly and the specialised Economic Offences Cell of the state Criminal Investigation Department, to be asked to probe the complaints, as and when registered with local police stations. 

The operators are expected to return to their normal activities only after they make arrangements to pay their dues to the bourses as well investors. Atul Choksi, chairman of the Ahmedabad Stock Exchange Brokers' Association said: "According to my estimate, in the F&O trading, the payment liabilities for the brokers and sub-brokers will be in excess of Rs 1,000 crore (Rs 10 billion) across the country. Of this, Gujarat, which has the highest retail investor base in the country in one state, will have a significant share. With the bourses showing such volatility, where on earth will the brokers arrange for the money to pay up counterparties?" 
He said because of sharp fall in prices of shares, including big stocks like Reliance, which had reported a high price of Rs 467 and low price of Rs 370.30 on Monday, people are bound to lose big money which will also affect investor sentiment in the state. 
"If the brokers default because of no fault of theirs -- rather, because of the political parties -- the investors will also land in a soup and also, it will not be easy for the brokers to stabilise their accounts," Choksi said. 
Local investors believe that as the brokers cannot delay paying up the exchanges, the investors will now be at the mercy of the brokers. 
Kishore P Ghiye, heading Rajkot Investment Trust, said: "What can we do, except abuse the brokers, shout slogans against them or lodge a complaint with the police? None of these things will get us back our money." 
Ghiye also blamed brokers and sub-brokers for letting investors handle F&O without any margin money, against the norm of 65 to 80 percent margin money. 
Anil Shah, vice-chairman of the ASE Brokers' Association, said, "The market came down so heavily, it already has started taking a toll on the brokers, specially those dealing in F&O on the National Stock Exchange. 
To come out of such a crisis, brokers will have to buy time and investors will need to wait. We hope with the formation of the new government at the Centre, things will be better in next few days."

Joydeep Ray in Ahmedabad