Wednesday, May 20, 2009

SHOULD WE HALT THE MARKETS ?


The much expected "Black Monday" finally turned out to be a "Golden Monday" to the disappointment of many !

Short sellers and investors who sold prior to the election results had to make a U turn and reverse their position as the outcome of the polls have jolted them. Investors who were waiting in the sidelines for the past few months, wanted to buy as the markets opened on Monday. Investors who bought at lower levels in the last one year wanted to take advantage of the good news and sell when the going is good.

FIIs & Hedge Funds, DFIs, etc., . . . all wanted to use this opportunity and look what happenned on Monday . . .

Brokers shut down business for the day as it was halted twice due to circuit filter trigger. No brokerage for them. Government lost revenue by way of STT, ST, EC, Stamp Duty, etc. But thats not the key issue. Retail Investors and DFIs could not book thier profits when the market gave an yield of 20 % per day ( technically, it works out to roughly 7,200 % per annum ! ) and forced to wait for another 24 hours - wondering whether all this euphoria will last till then.

Thankfully the overall markets continue to be positive till now.

Mutual Funds called it a no business day !

Now, this is a key issue to be addressed. MFs cannot be blamed because they cannot do business based on fairly unreliable data. In a market which clocks a volume of about Rs. 75,000 crores a day, it was hardly around Rs.3,000 crores on this Golden Monday, which includes both the cash and F & O Segments !

The market was open just for a few minutes and the number of trades were also low. Any decision taken based on such low volumes could be misleading. The volume on the succeeding day was a whopping Rs.1,57,781 Crores.

But its also not fair to the investors; particularly in this case they had to wait for more than 72 hours or three days for submitting the redemption request or purchase request amidst the crucial election results. The loss or gain could have been substantial during this period.

Is there a way out ?

May be.... if we look at what is done when an individual scrip touches the circuit breaker - it does not matter whether its upper or lower; Trading is not halted in that particular scrip. The investors are allowed to trade in the scrip throughout the trading hours, subject to the circuit limit.

Trading continues at the limits specified until the circuit filter is revised. This enables the investors to enter or exit in a particular scrip depending upon the situation.

This method is not without its own pitfalls; there may be lots of practical difficulties in implementing this system. But this is only a broad outline and may be time has come for us to work out some strategy to overcome this lacuna.

We cannot simply say that these kind of instances are rare events and ignore it. We are in an era of coalition and globalisation. Both will bring in great element of uncertainity, forcing us to be more prepared and vigilant.

Lets not have a "No Business Day" at all in the future !

Wednesday, February 11, 2009

Macro Vs Micro . . .

Yesterday a senior SEBI official addressed the investor population in Chennai. A friend of mine called and discussed with me about the things that the regulator can do from the investor point of view. We have discussed this issue many times earlier. Nevertheless we spent some time on the same subject.


A few more issues pending for a long time include :

  1. Uniform Face Value of Shares
  2. Shares with no F.V.
  3. Disclosure of end use of the funds raised by the Promoter by pledging his shares
  4. Disclosure of the rate at which the pledging was done ( ! )
  5. Derivatives trading settled in cash/delivery
  6. Simplification of IPO / Book Building Application Forms
  7. Application forms & prospectus in regional languages-both Equity as well as Mutual Funds
  8. Removing the upper ceiling in the price band of IPO/book building issues
  9. Enforcing a price band on listing day itself
  10. POA in regional languages
  11. Usage of a portion the income of SGF for IAPs
  12. Compulsory intimation of shares moved from the demat acount of a client by SMS/e-mail

Just a few samples; there are many more and the Satyam like issues slows us down sometimes.

While the earlier regime did a wonderful job at macro level, the present regime under the current leadership has brought a lot of changes at micro level, from the point of view of an average investor - paticularly the small investors. Even minor issue which were unresolved for a long period were looked into and appropriate solutions were suggested/implemented. The issues may be minor; but the effect on investor mindset is phenominal.

Can somebody add some more relevant issues to this list or comment on it ?

Tuesday, January 13, 2009

ARE SOUTH INDIA BASED COMPANIES SCAMSTERS ?

Atleast a leading TV "Anchor" (Investor?) thinks so.... One of the former SEBI Chairman made interesting observations about some of these "Anchor" investors from business channels.
Do they loose their balance probably because they have lost money personally in some investments?
Investors across the country lost money because of the recent scams and fall in the markets. There is no south indian or north indian when it came to losses.
Whether it is Mundra, Harshad Mehta, Kethan Parek, Co-operative Banks or Satyam - there is no question of north indian or south indian scamsters. Scamsters are scamsters. Period.
Dividing the country like this is a dangerous trend ! That too coming from a reputed channel.
When we go up in the ladder, we should be more humble and balanced. One should not talk something irresponsibly which hurts the sentiments of the viewers.
Hope they will be sensitive to the viewers across the Nation and stop dividing the citizens of this great Nation!

Wednesday, January 7, 2009

"SATHYA"MEVA JAYATHE . . . !

The fate of the "de-mutualised" IT Company is Interesting!

Technically there was no DPG -Dominant Promoter Group or CPG-Core Promoter Group in Satyam, as the original Promoters" Stake was less than 10 %.

So the top management had nothing to loose.There is nothing in it to motivate you to work hard .. .

Compare this with the 75 % plus Promoters" holdings in Companies like TCS or Wipro and their track records.

They also had plenty of Independent Directors on Board - of course they cannot take all the blame...is it not?. If this concept cannot work to safe-guard the investors, then it should be reviewed so that investors need not falsely believe the myth that, these IDs will ensure the safety of our investments.

Infact, the cost to Company may be higher because of these IDs,in most cases. it works typically like this : As soon as the date for the Board meeting is decided - in many cases, linked to a visit to Tirupati or Rishikesh- the Agenda with routine issues will be circulated to the Board Members. The important papers will be slipped in at the last minute just before the Board meeting.

Rooms booked in 5 Star Hotels, Airconditioned Car arranged for a couple of days, family taken care, flights booked to and fro,not to mention the dinners, etc.... at the cost of the / cost to the company.

The demutualisation - without a DPG/CPG might result in "nobody"s child" syndrome and the looser is always the retail investor.

BTW, personally speaking, i don"t want the Independent Director concept scrapped. I am a Professional with two decades of experience in capital markets and Industry. please allow me to enjoy these benefits one day in the future, if somebody chooses me as an Independent Director. let me not close the door before i get in . . .!