Prakash Kumar

 Supply and demand are probably the only two variables which in a market – monopolistic, oligopolistic or whatever should control the dynamics. However, this is utopia. In modern day climate –economics has taken a back seat and everything else is in forefront.

Today, market movements are driven by liquidity even if it means that blue chips (index stocks) are being bought while the broader markets struggle. Driving index stocks helps as suitable positions in the leveraged “derivatie” markets can be taken. Gone are the time, when there used to be short, medium and long term investment horizons – fast and easy money is the “need of the hour” and barring a very handful – most of the stocks today have symptoms of being, “high beta”. FII/DII money as per principals of economics alone should move in tandem – however a study of FII/DII buys and sell reveals they are just the opposite – when FII buy DII sell and vice versa. It is a type of movement which suits both. FII buys whatever DII sells cheap and take market to new highs at that point – FII exists booking profits and DII buys the beaten down – the selling is so intense when there is flight of capital by FII – the index stocks gets butchered so actually DII end up buying at a huge discount leaving the indicators like P/E and P/B and EPS appear a joke. We must pause here – what economic law should govern a FII/DII mirror operation – probably none.

News is second biggest aspect which rules. It is another thing though – that the common herd is shown only those news which helps the bigger players. It is an old age rule that market tends to take certain news in a positive way (say a rate cut) and certain news in a negative way (say an earning markdown). However, we live in an age of contra calls – over the authors observance of last few years trends market have just done reverse. It has reacted violenty upwards on a rate hike – with “experts” talking that this was already priced in and since market didn’t see anything more compelling. Simulataneously market (stock) has fallen after giving a stellar result – read RIL result of last quarter. Experts complain that market was expecting better – Here lie the catch. Depending on the positions significant market players and financial intermediaries have made in a particular counter – the expected ROE from a stock is announced – rest of the variations is done by market dynamics once the actual results are out.

Last few RBI meetings have become a joke. The majority opinion in the market is actually the word coming out of the Governor. We are not questioning “integrity” of information here – but would not be a bad idea if select finance honchos sit on RBI board and we dispense with umpteen “sarkari babus” who assemble to disclose their work and findings in their quarterly meet. We are not talking of few but there are close to 100’s of babus at these quarterly meetings – as long as there are so many human involved – any news cannot be considered full proof. Same story of expecatations and disappointments at a budget hearing can be extrapolated.

What is a good monsoon – >100% which lashes flood in deserts of Rajathan and states like Haryana or may be 90-95% which is good enough. Depending on how these numbers are reported by media and money channels – markets can react. Nothing sells better than “rumour” – want to make a profit of 20% in a stock – somehow cook a hoax story that a big corporate is looking for a “buyout” – the market will boom – contraray – raise a toast that there is distressed NPA in a particular counter and stock will bust – it will be another thing that the promoters will come out open and refute such “noise” but by then – market forces would have had their will and purses full. Retail – who took such “noise” as music is caught in a logjam – in such cricumstances.

KP and Harshad episode ran havoc and created a “black spot” in Indian financial system and were responsible for extinction of “badla trades”. The names have changed since – but basic anomalies of market remain – we have no idea of actual valuations of many companies. A stock which went up 20% yestrday and corrected 20% today without any significant corporate action must be dispensed with – market regulator “SEBI” for whatever good it is doing has been cold to such gyrations.

We need transparency of information, accountability of statements by everyone and we must have strong “disclaimers” for all those who are thinking aloud on umpteen news and print media. Just a mere statement that, I do not have any positions in the stocks spoken means a “damn” – we need to know who could be the possible beneficiary (if any) within the professional/personal horizon of such and individuals. Sessions of report card by news channel should be arranged and “experts” rating should be given to various experts. A person should be questioned regarding a particular statement he/she made and the context – a person who is clean will have better ratings and investor confidence will be restored. A double ended sword statement of something like – market can go up 5% from current levels if sun rises in east tommorrow and it can fall 5% from the current levels if the sun sets in west tommorrow is as confusing to an ordinary person who generally takes news on face value. Let us be shown what is the actual rather t