New Delhi, Feb. 25: Rattled by the frigid response to the public issues by a raft of state-owned companies, the BJP-led central government rushed into crisis management mode and claimed it had identified the bears who were mauling stock prices.
Disinvestment minister Arun Shourie today went into a huddle with financial advisers and the chairman of the market regulator, the Securities and Exchange Board of India, to work out strategies to rescue the offerings and to scare off probable market manipulators.
“We have identified the people behind it... Some people worked in anticipation that the government will announce a 5-10 per cent discount from the last closing price when it announces the floor price,” Shourie said after the hurriedly-called meet. However, the minister refused to identify speculators or to speak of any action against them.
Shourie instead charged issue advisers with correcting the market through an information campaign to “motivate” buyers. The minister said he would be reporting to the Prime Minister, deputy Prime Minister and finance minister about the developments as he saw them.
“We assume the small investor is doing something and we try to discover his motives but he is not doing anything. Only a few persons are trying to pull the market down,” he said.
Shourie said his aides were studying the stock trading patterns, especially on the days when the market was pulled down such as on Thursday, February 19.
The bidding for the government’s offering in IBP Ltd is believed to have been the worst hit. The first two days of the offer saw just 2 per cent of the 57.78 lakh shares subscribed to.
The Dredging Corporation stock was also hammered down today, just one day before its public issue hits the market. On the Bombay Stock Exchange, the stock ended down Rs 67, or 12.68 per cent, at Rs 460.85.
This happened after the government announced a price band of Rs 385-400 for the sale of its stake in Dredging Corporation besides offering retail investors a 5 per cent discount.
The sensex plunged 2.03 per cent today to 5,618.15 points. Analysts blamed the bunching of huge public offerings for the slide.
Leading merchant banker K. K. Sengupta said: “There is nothing wrong with the issue nor with the depth of the market. Its just that too many mega issues have been bunched up and investors are waiting to see which does better before putting their money on them. After all you have to realise this is the natural classical pattern of investors the world over — playing in herds.”