BSE chief Rathi finally goes

BSE chief Rathi finally goes
GEORGE MATHEW

MUMBAI, MARCH 8: Retail investor Ramesh Jain bought 100 shares of Himachal Futuristics Communications (HFCL) at Rs 1,200 per share a month ago. His investment of Rs 1.2 lakh depreciated to Rs 38,900 by Thursday, a loss of Rs 80,000 in less than a month. Since last week, thousands of Jains have lost money on the stock market, which has become a battleground for influential market manipulators ranged on the side of the bear or bull lobbies.

While the market regulator, the seemingly helpless Securities and Exchange Board of India watches, ruthless buccaneers continue to rig the system with impunity. As Praful Shah, a high net worth investor put it, ‘‘the common man’s confidence in the stock markets have completely evaporated in the machinations of the bears and bulls.’’

The bears have brought down the Sensex from the February 2000 level of 6,150 to about 4,000 in the last one year, specifically targeting infotech stocks which have been hammered down. The recent fall in the Nasdaq which has become the barometer of behaviour for Indian tech stocks has also come in handy for the group led by Ajay Kayan, First Global and Radhakrishan Damani, say sources.

One recent example which illustrates these operations is the Sensex crash on March 1. Bears went in for the kill a day after the presentation of the budget to pre-empt the bulls who were ready to come back into the reckoning, given the euphoric response the budget generated.

The turning point was when rumours began to spread that big bull Ketan Parekh, the man behind the IT boom on the BSE, was caught in a crisis over payment liabilities. The bears allegedly got sensitive market information from the BSE president about the big bull’s trading details. The result was a crash in the big bull’s favourite infotech stocks.

The incident brought back memories of 1992 when Harshad Mehta led a bull charge using bank funds until the scam was exposed and share prices collapsed.Some measure of the impact the securities scam had on market sentiment can be guaged from the fact that after crossing the 4,000 level in 1992, it took nearly seven years for the bulls to take the Sensex above the 5,000 level in 1999.

After it crossed the 6,150 level in February 2000, the bears spotted an opportunity as analysts began to warn of stocks being grossly overvalued. Since then, the market has seen a sustained fall against the backdrop of an industrial slowdown.

Analysts say market movements are usually cyclical in the sense that they go through periodic ups and downs. After a sustained fall, the market usually begins to anticipate a period of resurgence. In the case of the Sensex, now may be the time.

The budget did present an opportunity on a platter. Buoyed by industry’s reaction to the Finance Minister’s proposals, the bulls had even begun to reassert themselves to pull the Sensex up 177 points. And the climb may have been sustained if it were not for leakage of information.

As retail investor and bank employee Venkatesh Aiyar says: ‘‘Despite a good budget, the market crashed...this shows the tentacles of market manipulators have penetrated the entire BSE set-up. It’s time for the Sebi to supersede the BSE governing board with outside and independent directors.’’

Pawan Dharnidharka, a BSE broker, says: ‘‘The crash (after the budget) is yet another example that our surveillance is weak and Sebi should be given more powers to deal with the situation effectively. The fact that sensitive information was leaked to the BSE president shows time has come to install a professional management in the Exchange.’’

With Sebi now banning short-selling or selling of stocks unless they are backed by equivalent purchases, and the Government seemingly keen on seeing the market respond favourably to the budget, it may well be time for the bulls to storm the bastion once again.