The Hindu Business Line : ‘US has lessons to give on investor-friendly action’

Worried investors look at an electronic display board of BSE and a table full of IPO and mutual fund forms at Dalal Street in Mumbai on Thursday as the stock markets failed to hold early gains today with the Sensex plunging nearly 372 points on heavy selling by funds to book profit at existing higher levels. —

Rasheeda Bhagat

Chennai, Jan. 24 The bruised and battered investors of Mumbai are looking at government intervention to bail out the traumatised equity market. In broking circles in Mumbai, as traders and brokers watched the sharp and sudden turnaround the indices took on Thursday, views were once again exchanged on the “positive, affirmative action taken by the authorities in the US to come to the rescue of their markets.”

On Thursday, after the previous day’s relief rally, most brokerages who had allowed only investors with a credit balance or cash transfer to trade during the previous two days, relaxed the norm a little bit. “We allowed those investors who came with cheques in hand to buy stocks today,” said a broker at Andheri.

Naturally, the volumes were low and the mood sombre. “We were talking about how our government always lets the equity investors down. In the US, first the President, Mr George Bush, gave out very positive statements about a strong package and the Fed had an emergency meeting, days before schedule, to cut interest rates by 75 basis points. And they did this before the US market opened; this is what we called quick and timely action. We expect the same kind of action from our RBI, but we also know that it will not come in time to help us out of these troubled times.”

Call for action

Immediate action was required, “but we’ve seen during many crashes of the past, that this never comes. Much more is required than just lip service about the economy being fundamentally sound,” he grumbled.

As at most brokerages, the majority of his clients are Gujaratis, and they have lost lakhs of rupees in the last few trading sessions. “Those who had positions in the F&O segment really got butchered; of course we’ve retained the positions of those who could immediately bring in the required margins, but had to close the positions of those who could not,” said the broker.

He was quite upset over “everybody, including the media, making it appear as though we are heartless villains for doing this, but what option do we have?”

But there is one group out there in the equity market, which has simply loved the market meltdown — the jobbers. These buy and sell shares in huge quantities — a couple of thousand — almost every minute.

Another Mumbai broker, who has a few dealing rooms catering almost exclusively to jobbers and arbitragers, said: “These are extraordinary times for jobbers. They love volatility and today’s volatility was perfect for them; they made big money.”

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