The Telegraph
Since 1st March, 1999
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Watchdog ready to go after rampaging bears

Mumbai, March 17: The Securities and Exchange Board of India (Sebi) today said it was keeping a close watch on the way markets have behaved in recent weeks, signalling its intent to crack down on those running amok.

Chairman G. . Bajpai said prompt action would be taken against market misconduct and those found guilty of breaching market regulations would be penalised. He was speaking at a seminar on straight-through-processing trades here.

Bajpai’s warnings, a familiar response whenever markets flounder, was shrugged off as mere agonising by operators who wanted the regulator to fix the problem right away. “If you find something wrong, correct it immediately. Is he trying to talk up the markets to keep the gloss on the feel-good sentiment'” they asked.

The hard-talk failed to impress dealers, but it did reverse the slide this afternoon. The BSE sensex gained 10.60 points to end at 5535.69, after Sebi spoke its mind.

Throwing the government’s weight behind Bajpai was S. Narayan, economic advisor to the Prime Minister. After discussions that covered the past month but focused on this week’s Monday’s mayhem, he said Sebi is fully competent to look after investors’ interests.

Behind promises to keep markets steady and safe lies the real issue: why, after all, have stocks hit the skids'

Analysts have several reasons. One of them is the reality that shares have to cool off after one of their steepest climbs. From a trough of 2900 in March 2003, the sensex hit 6000 in January this year. “This hardly put the market regulator on a high alert. But a 3 per cent correction is enough to unsettle them,” a dealer said.

The government’s move to nudge companies to rein in prices of commodities like cement and steel amid soaring raw material costs in the industry has unnerved many. The performance of these sectors may be affected in the short term, at least till elections are over.

Then, there are sector-specific concerns. Honda Motorcycles, for instance, has set the cat among pigeons with plans to launch a 150-cc bike. This sent two-wheeler shares on a rocky ride over the past few weeks.

The primary market itself has seen a staggering Rs 18,000 crore flowing in — an amount that would have otherwise been invested in the secondary segment. “This has hit sentiments in the short run,” analysts said.

The rush of Indian companies to raise capital abroad has been a downer too, while price wars unleashed in the FMCG industry by Lever and the BPO backlash are seen as the other factors that have kept the bulls in slumber.

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