A lot of Bull

Until the government forgets about maintaining the high Sensex levels, it's nearly impossible to check frauds. The Market and the government work in tandem to help each other's interests

Akash Bisht Delhi
In 1992 when the securities scam broke out in the Mumbai Stock exchange, the then finance minister, Manmohan Singh, was blunt enough to say that he does not lose his sleep over the Sensex. His statement made it clear what he thought of the stock market and how it was peripheral to India's economy. This was long time ago. Since then the government has been showing an obsession to keep the stock market high at all costs even if it means maintaining a blind eye at insider trading, frauds and scams.

The recent Satyam scandal, for instance, is a good example of how big corporations can manipulate the markets out of their convenience. They are helped by the somnolent attitude of the regulators who just cannot fathom the extent of fraud perpetrated by the bulls, bears and corporate houses. Market watchers believe that the enormity of such manipulations have increased manifold because of the speed at which the stock market has been growing, despite all the regulatory restraints put in by the government.

The volatility of the markets is visible around the world and this has driven out small investors. The government is aware of what is happening in the market, but chooses to keep its hands off. Reason: Harsher restrictions would pull the stock market down and the government cannot afford it as it would drive away foreign investors.
Stock market watchers believe that the system is not at fault, but the people who manage and run it are. "If the people with these regulatory bodies would have done their work as desired, such manipulations could have been stopped if not wiped out completely," says Professor Chalapati Rao of Institute for Studies in Industrial Development (ISID), and a close watcher of the stock markets.

Rao also blamed the lack of political will in exposing these frauds as political parties are beneficiaries of the dubious funds that enter India from tax havens, especially during elections. A common practice is that the big corporations and individuals are investing in countries like Cyprus and Mauritius. The money then makes a round trip back to India. So no one is aware of where these funds are coming in and who is doing it. "This has become a common trend and the government and its regulatory bodies are well aware of it. But no concrete efforts have been seen on the ground," says a market expert.

Corporate scandals seldom get exposed until circumstances leading to it come out in the open. The people who run these corporations are highly talented and skilled individuals who are well aware of the nuances of the market and know how to manipulate it without being caught. "People running these companies are part of a small club and today they might be with Mckinsey and tomorrow with the Citi group. So they know the loopholes of the systems and how to take advantage of them. If Madhu Koda, a tribal, can siphon off funds to this extent then imagine what these extraordinarily intelligent graduates from Ivy League colleges can do," says Rao.

He rubbished the notion that public sector undertakings (PSUs) belong to the people. Hardly anyone, according to him, knows who the real investors in these corporations are. Many politicians have stakes in these companies after they were disinvested.

Most of the big businesses in India are owned and controlled by families. Hence, any favour that the government doles out to these companies, like bailouts or subsidies, don't benefit the common investor. It is only the family that benefits from it.