Securities and Exchange Board of India chairman G N Bajpai has said the regulator has taken note of promoters who are selling a part of their holding at higher levels and then picking up shares at a lower price by converting warrants issued to them earlier through preferential offers.
The regulator is also looking at loopholes in the existing insider trading rules, wherein promoters need not inform stock exchanges about the sale of shares by them on the same day.
Bajpai said Sebi would take corrective steps if the actions of the promoters were found to be detrimental to the interests of the investing public.
He said Sebi was on a high alert and keeping a close watch on the current stock market boom.
Steps such as lowering the circuit filter levels, increasing margins, and disallowing trade for trade (day trading) were already being taken to curb speculation in some scrips, according to him.
He said Sebi has taken several steps to bring down the structural, systemic and operational risks in the stock market to the barest minimum level.
"Today, we follow the T+2 trading cycle. We have in place a risk management system, which will automatically stop brokers from trading once their exposure exceeds the margin limit. We also have a guaranteed third-party settlement. These practices are not followed even in advanced countries like the US," the Sebi chairman said.
"Over the last one-and-a-half years, we have issued 561 orders against various entities rendering various punishments. We want to send a clear message that those who do not conform to the rules will be punished," he added.
Bajpai also stressed on the need for investors to take informed decisions.
"If you are buying a saree, a T-shirt, or even vegetables, you look for quality and price. Why not do the same thing in stock market," he asked.
"All companies do not have the same economic fundamentals. There are companies which have re-engineered themselves and doing well. There are others which currently have no value. Investors should make better informed decisions," he said.
"If the investor is not bothered about the facts, and makes investments based on rumours, then only God can help him," Bajpai observed.
The Sebi chairman also noted that the country "has a strong investment theme," with its economy growing at a rate of more than 6 per cent.
"The exposure of foreign investors in the Indian market has crossed $3 billion mark this year. It means people outside India have increased their exposure to the country. And they are not simply throwing dollars. If we were not doing well, we would not have experienced these kind of inflows," he said.
Sebi chairman noted that investors now had various investment options such as equity, equity derivatives, corporate bonds, government securities and interest rate derivatives.
"Based on these options, the investor has to choose the level of trade-off that he can afford," Bajpai said.