A security guard and employee check a registration log at the National Stock Exchange of India Ltd. (NSE) building in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

India Said to Review Slump in Financials for Irregularities

(Bloomberg) -- India’s market regulator is examining Friday’s sharp moves in shares of Dewan Housing Finance Corp., Yes Bank Ltd. and other lenders for possible trading irregularities, people with knowledge of the matter said.

The Securities and Exchange Board of India is looking into whether brokers and investors colluded during the sharp selloff and subsequent recovery in financial shares, the people said, asking not to be identified due to the sensitivity of the matter. The rout, which deepened Monday, has erased about $13 billion from the value of a gauge of financials.

The regulator is examining data from India’s two stock exchanges on which parties were buying and selling financial shares, and on the sequencing of the trades, the people said. SEBI may launch a full investigation if it uncovers evidence of wrongdoing, the people added. A SEBI spokesman didn’t respond to a message and phone calls seeking comment.

India Said to Review Slump in Financials for Irregularities

The move comes after Indian authorities and the central bank vowed to support markets spooked by growing concerns of defaults by shadow banks. Volatility erupted in Indian equities Friday after plunges in Dewan Housing and Yes Bank sparked a rout in financials. Dewan Housing tumbled as much as 60 percent before paring losses to end down 43 percent, while Yes Bank slumped as much as 34 percent before recovering to close down 29 percent. Indiabulls Housing Finance Ltd. slid as much as 35 percent.

SEBI is concerned that low trading volumes in financial stocks didn’t warrant the size of the share price swings, the people said. The watchdog is also examining data to determine if trading took place based on unpublished price-sensitive information, they added. Some of the lenders have briefed the stock-exchange authorities on the slump, the people said.

Share losses in non-banking finance firms extended Monday after Infrastructure Leasing & Financial Services Ltd., a lender at the heart of India’s recent credit market woes, missed debt payments on Friday. Indiabulls Housing declined 7.6 percent at the close and PNB Housing Finance Ltd. slid 8.9 percent. Edelweiss Financial Services Ltd. tumbled 8.1 percent.

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