Remember Ketan Parekh? Some KP10 stocks still doubled investors' wealth

NEW DELHI: It was March 1, 2001, when Ketan Parekh shook the very foundation of the Indian financial markets.

The biggest bull on Dalal Street after Harshad Mehta caused one of the biggest wealth erosion, refreshing memories of the Harshad Mehta days.

Ketan Parekh manipulated the market to suit his needs and unleashed one of the most maniacal episodes in India’s financial history, but his picks continued to deliver regardless of their master’s demise.

On March 1, 2001, two days after the Union Budget, the BSE Sensex crashed 176 points, prompting the then NDA government to set up an inquiry into the market reaction. At that time, the Madhavpura Mercantile Bank scam broke on Dalal Street, leading to a massive erosion in wealth and confidence, compounded by the so-called dot com bubble.

By the end of March, when Ketan Parekh was arrested, the Sensex tanked another 149 points leading to wealth erosion of a kind that was never seen before on Dalal Street.
He was charged, banned from trading for 14 years and jailed, as the regulators and the government went out of their way to ensure a repeat of what Parekh had foisted on the market.

The man, who made millions by trading in stocks, drove several small-time investors who followed his lead into bankruptcy.

In those days, Parekh had turned ten stocks the gold standard of Dalal Street. Nothing could touch them. They were the ACCs of the Harshad Mehta era.

They were known as the K-10 or the KP pack.

The K-10 pack included the following stocks: Amitabh Bachchan Corp, Himachal Futuristic Communication, Mukta Arts, Tips, Pritish Nandy Communications, GTL, Zee Telefilms, PentaMedia Graphics, Crest Communications and Aftek Infosys.

We decided to go back to that infamous pack and see how they have performed in the past 10 years ever since Parekh’s memories faded on Dalal Street.

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Parekh chose these companies for investment, which got listed as high growth companies with a small capital base.

Out of the 10, only seven companies have survived the test of time. Amitabh Bacchan Corp is no longer listed while Aftek Infosys and Crest Communications have since been suspended from trading by the bourses.

In terms of performance, some of these stocks still doubled investor money over the past 10 years.

Himachal Futuristic Communication, Tips and Zee Telefilms rallied as much as 209 per cent in the past 10 years, data compiled by ETMarkets.com showed.



In the past five years, the same group gave returns going up to 263 per cent.

Out of these, Zee Entertainment has managed to shrug off the Ketan Parekh voodoo and managed to give a healthy return of 263 per cent over the past five years and 94 per cent returns over 10 years.

Yogesh Mehta of Motilal Oswal Securities believes the company’s recent earnings performance has made it a strong buy candidate.

“We are projecting Rs 8,500 crore sales for Zee with Rs 2,000 crore PAT, which will lead to an FY18 EPS of 27 times,” Mehta told ET Now in an interview.

But, not all have been winners. Of the seven, three have given negative returns to investors with GTL leading the pack.

The stock has lost 91 per cent in the past 10 years followed by PentaMedia Graphics (down 88 per cent) and Pritish Nandy Communications (down 61 per cent).

In comparison with other media stocks, KP-7 have managed to perform fairly well against them as is evident in the chart below.



Overall, media stocks have fared well in the market since the 2001 crash, with Chakri Lokapriya, CIO & MD of TCG AMC, making them one of his favoured sectors for value pick.

“We find value in some of the services companies, including media,” he told ET Now.