Mumbai broker Parekh stays in custody

Broker Ketan Parekh will stay in police custody until May 3

In this story: Complaint lodged by Bank of India K-10 stocks hit hard in downturn RELATED SITES

By Shishir Joshi
Special to CNN

MUMBAI, India -- An Indian court has again remanded Mumbai stockbroker Ketan Parekh in federal police custody.

Parekh, who was arrested by the Central Bureau of Investigation on March 30 and is accused of bank fraud, appeared in a Mumbai court Thursday.

Additional Sessions judge A.R. Joshi extended Parekh's remand until May 3, saying he might be required for further investigation. But the judge also directed the CBI to give the court a written report about its progress in investigating the case.

In a related development, another key accused, Ramesh Parikh, the chairman of the Madhavpura Mercantile Cooperative bank, surrendered to federal police on Thursday. Police said he had not been arrested.

"He came to us in the morning and we will be interrogating him now," a CBI spokesperson said.

Parikh, who is not related to Ketan Parekh, is wanted for questioning in connection with the pay orders issued by his bank to Parekh.

Complaint lodged by Bank of India

Parekh, one of the best known stockbrokers in India, was arrested after a complaint was lodged by state-owned Bank of India. Parekh allegedly used bank funds to pay losses incurred after a crash in stock prices.

Parekh is accused of defrauding the bank of about $30 million, allegedly in connivance with the Madhavpura Mercantile Cooperative Bank

Investigators maintain they need more time to probe Parekh's role in the scam and to determine whether there were others involved. India's domestic stock markets seem to have factored in Parekh's remand extension, analysts said.

The bellwether BSE Sensex was beginning to rally, with foreign institutional investors buying technbology stocks again. However on Friday morning, it opened lower, trading 152 points down at 3406.11.

K-10 stocks hit hard in downturn

Most of Parekh's favored stocks, known as the K-10, had been among the worst hit by the stock downturn. But they too appear in recovery mode now. Most lost over 80 per cent in value after the allegations against the broker surfaced.

India's domestic stock markets crashed in early March, after what initially was seen as a market friendly Budget unveiled by Finance Minister Yashwant Sinha.

Within a few days of the budget announcement, the Sensex index at the country's oldest stock exchange, the BSE in Mumbai, fell almost 700 points, or close to 15 per cent. In one week alone, 20 per cent of the 1628 traded stocks touched their 52-week lows.

A probe launched by the market regulator SEBI led to suspicion of insider trading involving BSE president Anand Rathi and the exchange's broker-management.

Tapes of the BSE president's alleged involvement in the scam compelled him to step down, and SEBI suspended the entire broker-management at BSE. It also suspended their business.

BSE, Mumbai

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