* Tata Motors, UltraTech shares slump after block sales
* Falls come after sales take place at steep discounts
* Sales spark freak trade speculation; exchange looking into
(Updates with quotes, details, background)
By Rafael Nam and Abhishek Vishnoi
MUMBAI, Feb 1 India's National Stock Exchange
was investigating the deeply discounted sale of large blocks of
shares in Tata Motors and UltraTech Cement
in late trades on Friday, the latest in a series of unusual
price movements to rattle the market.
An NSE official said the block sales in the two stocks
appeared to have come from a single broker and the exchange was
looking into the matter.
The unusual pricing reminded dealers of the time in October
when a series of large erroneous orders were made on a broad
basket of shares by a broker at Emkay Global Financial Services
that sent the NSE's main index tumbling as much as
That incident had sparked concerns about the stability of
the country's trading systems.
"In the long run these types of trading incidents may sap
confidence of long-term investors, and as such, can erode the
value of their portfolios significantly," said Deven Choksey,
managing director of KR Choksey Securities in Mumbai.
Officials at both companies said they would not comment on
market movements in their share prices.
A total of 2.07 million shares in Tata Motors were sold in
six blocks at an average price of 274.92 rupees in the
afternoon, well below the roughly 292 rupee level at which the
shares were trading at the time.
Tata shares fell as low as 268.25 rupees before ending the
session down 5.49 percent at 281.64 rupees.
Shares in UltraTech, a cement maker, ended down 3.4 percent
at 1,838 rupees after an earlier block sale of 41,863 shares
took place at an average 1,853.80 rupees, also well below where
shares were trading at the time.
Both trades took place around the same time.
The trades were far smaller than the erroneous ones by Emkay
The block sales in Tata Motors comprised about 0.1 percent
of the automaker's total shares in free float. For UltratTech
the proportion was even smaller.
The falls in both were well within the 20 percent moves that
are allowed for stocks that also trade in the futures and
options markets before circuit breakers are designed to kick-in.
"It seems like possibly somebody has done a freak trade in
Tata Motors and UltraTech because in large cap stocks the
bid-ask gap is not huge," said G. Chokkalingam, chief investment
officer at Centrum Wealth Management.
The falls on Friday also revived concerns about whether
Indian exchanges are equipped to deal with potentially much
bigger incidents of the type if not the magnitude of the Wall
Street "flash-crash" of May 2010.
In April last year a sudden drop in NSE futures jolted
investors, although the NSE said it was not caused by an
During the $2.6 billion auction of shares in state-run Oil
and Natural Gas Corp last year the websites of the two
main exchanges failed to update bid activity after 3:20 p.m., 10
minutes before the close of the auction, leaving investors in
the dark for several hours.
In December the Securities and Exchange Board of India
(SEBI) unveiled a new set of measures aimed at avoiding sudden
price moves, including reducing the trading band for a wide
category of stocks and capping single orders at nearly $2
Confidence in India's two established exchanges is an
especially sensitive topic for bourse officials as new exchange
operator MCX-SX is due to start share trading on Feb. 11.
One of MCX-SX'S two controlling stakeholders is Financial
Technologies, a provider of front-end trading
technology that has over an 80 percent market share for NSE and
(Additional reporting by Manoj Dharra; Editing by Tony Munroe
and Greg Mahlich)