In this week’s newsletter, we talk about how TV show stock experts pocketed nearly ₹8 crores, how GIFT City has convinced businesses to set up shop and a lot more.
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How stock experts minted money from TV shows
Zee Business is the number one ranked business channel in India as per data from the Broadcast Audience Research Council (BARC).
And guess the most popular shows?
Anything to do with the stock market, of course — ones such as ‘First Trade’ and ’10 ki kamai’. Everyone wants to get a stock tip from the ‘experts’ who feature on the shows with the hope of making some quick bucks.
But looks like a few of these stock experts had ulterior motives when they made an appearance. They had a ‘get rich quick’ scheme in mind of their own. And the market regulator SEBI points out that some of them made close to ₹8 crores in profit in under a year!
So how did they do it, you ask?
In one word — front-running.
See, we told you some of Zee Business’ most popular shows involved stock recommendations. These even included the BTST (Buy Today Sell Tomorrow) kind. Now these shows would invite a certain set of expert stock market guests. For instance, Kiran Jadhav and Ashish Kelkar who were also business partners, ran a show called Kiran Ka Kamal (Kiran’s Magic). Himanshu Gupta’s show was called Hitman Himanshu and Simi Bhaumik had a show called Simi Ke Non Stop Shares (Simi’s Non Stop Shares). And while Mudit Goyal was not even a SEBI-registered Research Analyst, he recommended stocks on a show called Mudit Ke Munafe (Mudit’s Profits).
And maybe their TV influence planted an evil idea in the head of Nirmal Soni, the mastermind behind the whole fraudulent scheme. He’s someone who initially worked with a stock broker and then struck out on his own. Maybe his experience helped him build connections in the industry too. And soon, he may have been encouraged to approach guests whose stock shows were a buzz on Zee Business.
His scheme was simple. He’d take stock recommendations from these guest experts a few minutes before they’d appear on TV. Then he’d pass this information to his network in a couple of stockbroking entities.
So if a guest expert told Nirmal that they’d be recommending viewers to buy a certain stock, his network would go ahead and lap up those shares before the guest went on air. The stock recommendation would influence the public to invest in them immediately. And that would increase trading volumes and in turn, increase stock prices too. As soon as that happened, Nirmal’s associates would sell the stock and pocket a cool profit.
And if you’re wondering how much influence these TV guests had on the stock market, here are a couple of mind-blowing figures that SEBI highlighted in its interim order.
When Simi Bhaumik recommended viewers to buy the stock of Balrampur Chini in August 2022, trading volumes rose a whopping 300% as soon as Simi asked viewers to buy the stock. Everyone jumped in.
And this isn’t the only case. Most other examples that SEBI quoted in its order had similar spikes in trading volumes.
The end result?
A group of 10 people including the guest experts made a total of ₹7.4 crores in a span of 11 months. Folks like Nirmal Soni ended up making nearly 300% more profits from these recommendations than he’d make from his regular trades. That percentage was a whopping 1,900% for Nirmal’s company Manan Sharecom.
And SEBI has barred all of them and others who helped pull off the stunt from trading in the markets until it passes a final verdict. Meanwhile, they also have to pay back the crores of profits they illegally made.
Now here’s the thing. Journalists or TV personalities front running isn’t new. In 2021, CNBC Awaaz’s news anchor Hemant Ghai and his family were barred from trading in the stock market for doing something similar. And despite SEBI’s strong laws against the practice, it hasn’t stopped.
So what encourages them?
Here’s how a widely published economic commentator, Vivek Kaul put it in Newslaundry:
When I first started working for a newspaper in October 2005, it was very common for reporters to write a piece on a particular company and inform a stockbroker about it. They knew that their story would move the price of the stock the next day, after the story had appeared in the newspaper and people had read it. The broker would take a position in the stock because he had advance information.
The next day, after the story appeared and the stock moved, thanks to the news item, a profit was made and was shared between the broker and the reporter. Sometimes, the reporters were so blatant that they would call brokers directly from their office phone numbers.
…
Around a decade back, the business media started getting its act together and got into contracts with journalists which did not allow them to buy a stock today and sell it tomorrow. If a journalist bought a stock, he had to hold on to it for a while. This ensured that any front running moved on to accounts of mothers, wives and girlfriends. The smartest of the lot just took a cut for every piece of information they provided a stockbroker with, without getting involved in the buying and selling of the stocks. The payment to them was made in cash.
So yeah, maybe the guest speakers at Zee Business too felt confident that appointing mules, who weren’t related to them, would help them make ill-gotten gains from their TV appearances.
The only catch?
Simi Bhaumik, one of the guests also shared guest experts’ recommendations with her husband before she appeared on TV, who in turn made 90% of his entire trading profit from these nudges.
Now that’s an amateur move. And maybe that could’ve given SEBI a cue to start investigating. We don’t know.
All we know is that front-running is illegal. And SEBI actually built an AI tool to scan how stock recommendations from TV shows affect trading volumes. If it found anything fishy about an unusual spike in trading volumes because of certain shows, it would then go out and investigate. Now, SEBI kicked off this tool in December 2022. And coincidentally, that’s also the month until which this investigation on Zee Business’ guest experts suspected front-running.
Hard luck!
The rise and rise of GIFT City
A decade ago, everyone had one story to tell about India’s GIFT City. The ₹78,000 crore plan considered a pet project of the country’s incumbent Prime Minister looked like it was on the verge of failure. The posh buildings that the plan visualised were incomplete. Power utilities were missing. And there was no sign of the corporate tenants who were expected to populate it.
Cut to 2024, things have changed.
GIFT City is bubbling with construction activity. Swanky residential apartments, a school and even a hospital are being built at a frenzied pace. And its high-rise towers house about 400 offices and employ 26,000 people. Startups and established companies are looking to move their base, business or investments here.
So what changed, you ask?
Well, let’s take it from the top.
In 2007, when Narendra Modi was the Chief Minister of Gujarat, he announced an ambitious plan. He wanted to set up an international financial centre along the banks of river Sabarmati in Gandhinagar. Apparently, he was inspired by Shanghai and wanted a smart city along those lines — one that would rival global financial centres in London, New York and Singapore. So he brought aboard the same folks who’re credited with planning modern-day Shanghai and asked them to chalk out a blueprint for this new city.
Sounds like it would’ve been a recipe for success, no?
Well, not quite. Because planning alone wouldn’t cut it. The execution had to be robust too. And therein lay the problem.
Because even the most basic construction activities at GIFT City were facing issues. For instance, the aviation ministry was hesitant to hand out permissions for constructing tall buildings that would dot the city’s skyline. And the National Highways Authority of India wasn’t in a hurry to even give the green light to lay power cables. Everything came to a standstill.
In the meantime, Mumbai was already India’s financial capital. And the central government had already made plans to develop the Bandra Kurla Complex (BKC) area into a fierce rival to Singapore, London, and New York. So why would anyone bother with another city in some corner of Gujarat?
It looked like Narendra Modi’s pet project wouldn’t see the light of day.
But in 2014, everything began to fall into place for the success of GIFT City.
Why, you ask?
Well, the BJP-led government came to power in the centre. Chief Minister Modi became Prime Minister Modi. And you can imagine that gave him the power to push through his plans for Gandhinagar.
The city had got the tag of a SEZ (Special Economic Zone). This meant that the economic laws would be much more liberal for companies here than in any other part of the country. And the incentives came thick and fast after that — there was a 10-year tax holiday for companies that set up shop here, no GST would be levied on services provided to and received from GIFT City-registered units, and a whole host of other stuff.
Heck, even the failure of its joint-venture development partner didn’t stop the project in its tracks.
Oh yeah, there’s something we didn’t tell you earlier. GIFT City was actually a joint venture between the Gujarat state government and IL&FS (Infrastructure Leasing and Financial Services Ltd.), a construction and financial services company. But the latter ran into trouble in 2018. It accumulated close to ₹1 lakh crores in debt and couldn’t pay its borrowers back. So the projects it had in its kitty stalled. And GIFT City was one of them.
But the government soon jumped in and took over the stake IL&FS had in GIFT City.
Quite crazy, huh? There was no stopping this ambitious plan.
And the game changer seems to have come in 2020. The government decided to create a single unified regulator in the zone — it was called the International Financial Services Centres Authority (IFSCA) and it took on the role of the existing four domestic regulators in the area. It would cut down on the red tape and make the lives of businesses easier.
Why do we say this was a game-changer?
Well, remember the Silicon Valley Bank Crisis last year?
It was mayhem all around because a lot of startups banked with them. Even Indian startups. But when it looked like it was on the verge of collapse, these startups rushed to withdraw their monies. And guess where over $200 million worth of startup funds landed up?
To banks in GIFT City!
And it’s just been one thing after another since then.
We launched one of the only 3 dedicated bullion exchanges in the world in GIFT City to centralise the import market of gold. And in a bid to woo more startups, the government even launched an exchange where Indian startups could quickly list their shares to raise money from foreign investors. Before this, they’d have to go via the GDR (Global Depositary Receipt) route. They’d have to issue shares to a local bank for safekeeping which would in turn connect with a foreign bank and issue something called depositary receipts. These receipts would get listed on foreign stock exchanges and derive their value from the company’s Indian shares. It’s actually a cumbersome process. But now, they could simply list themselves on the exchange within GIFT City and get all the benefits.
So yeah, things seem to be going quite well for GIFT City right now. And who knows, we might indeed have a financial services centre to rival London, New York, and Singapore pretty soon!
What do you think?
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