The Hindu Business Line : The basis of wealth

True, the stock market should not be taken as a faithful yardstick of the true worth of the economy, but, even so, there is cause for serious concern when ‘wealth’ is created ‘overnight’ and destroyed as quickly. The problem assumes a personal dimension for thousands of powerless average citizens who can suddenly find themselves literally on the road with their life’s savings vanishing into thin air in minutes.

Price ‘disappointment’

Clearly, this is not what should mark the operations, in all its myriad facets, of a healthy economy, growing at an impressive pace over the past few years. And yet, this is the reality, one which, ironically, has a far more concrete basis than the ‘reality’ associated with wealth made on the bourses. To put it mildly, such wealth is ephemeral, and it is now time — after what happened last Monday — that the authorities should not only sit up and take notice (they have been doing just that for ages, it would seem) but also act to make sure that the Reliance Power price ‘disappointment’ is not repeated in future.

This is easier said than done because, in Indian conditions, as long as the ‘gambling’ instinct continues to rule the roost in market operations, there is no way in which events such as the Reliance Power price ‘failure’ can be avoided. What this, therefore, means is that regulation of market activity will nearly always fail to keep things under control, for a number of reasons which are too well-known to need repetition. But if events like the Reliance Power floatation and its poor performance on the market floor are to be avoided — and they have to be avoided if the future growth of the Indian stock market is to be made more orderly and responsive to the ‘real’growth of the economy (what has been known for years as the ‘fundamentals’ — there is simply no alternative to the market regulator being additionally empowered to deliver what is urgently required.

A ‘human’ problem

The point that will be made is that the powers that already exist are sufficient to produce results, the inference being that, in that case, there is something grievously wrong with their implementation. That is, the culprit is essentially a ‘human’ problem, the fault thus lying not in our stars but in ourselves, as the bard would said. The thousand-crore question then is: Is this human problem solvable? The answer, of course, is fiendishly difficult because it basically involves battling the native ingenuity of the Indian trader, whose tentacles leave no corner unexplored and whose ability to overcome and circumvent any obstacle in the way of making quick money is boundless.

Facts and extrapolation

Briefly, at the moment, there appears to be no way in which the ailment can be effectively treated. As the Reliance Power experience has shown once more, it not an issue involving ‘expectations’ at all, which should always be based on facts as they stand now and their extrapolation. The Indian stock market is a massive arena for gambling with shares, no stone being left unturned for making a quick buck (read crore).

Indeed, since the world has gone topsy-turvy, the point can perhaps be made that the seeds of the Reliance Power traded-price disaster were sown by the huge success of the floatation itself, which, it is felt, led to a liquidity problem and a severe depression in the market generally, which in turn affected the Monday outcome. Arrant nonsense, one will say, but then can one make any sense of the stock market gyrations these days?

RANABIR RAY CHOUDHURY

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