ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
-A A +A

Stock-Brokers Opera

THE 10 to 12 per cent loss in share values, as measured by the BSE Sensex and the NSE-50, in the post-budget period considerably understates the malaise in the capital market. Sharp fluctuations in the prices of individual scrips, huge build-up of speculative positions with the help of 'badla' financing at mindboggling rates of interest, sustained price- rigging, extensive arbitraging between the Bombay Stock Exchange (BSE) and the National Stock Exchange .(NSE) because of the differing settlement periods and, most shamefully, the re-emergence of Harshad Mehta as a major operator once again on the stock exchanges have all dragged the credibility of the stock exchanges in the mud. The annualised carry-forward ('badla') rates for some scrips reportedly skyrocketed to 150 to 185 per cent attracting over Rs 1,000 crore of badla finance in some weeks of June (compared with the normal levels of around 20 per cent and Rs 200-250 crore, respectively). The loss of credibility of the stock markets caused by the freewheeling manipulations of market operators under the very nose of the regulatory authority have undoubtedly been a major factor in the net disinvestment by foreign institutional investors (FIIs), on top of the international sanctions after the nuclear tests, the generally depressed outlook for the economy and the confused central budget. There was a net outflow of F1I investments in each of the months of the April-June quarter, adding up to $457.2 mn or approximately Rs 2,000 crore in the quarter. As it is, net FU investment of $1,649 mn in 1997-98 had been a third lower than in 1996-97 ($2,432 mn).

Subscribers please login to access full text of the article.

New 3 Month Subscription
to Digital Archives at

826for India

$50for overseas users

Get instant access to the complete EPW archives

Subscribe now

Comments

(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top