Tuning into CNBC in the netherworld, big bull Harshad Mehta was gripped by sudden nostalgia. ‘‘Another bull run is on in India. The Sensex has hit 21,000 and here I am, missing all the action. I must check this out”, he said, teleporting himself straight to the Fort area in Mumbai.

As he walked into Dalal Street, guards in army fatigues, toting machine guns barred his way. ‘Wow’ he told himself, ‘‘there must be so many investors thronging BSE that they need riot police to keep them under check’’. But Dalal Street proved to be completely deserted except for a few stray dogs.

Puzzled, Mehta asked the solitary chap selling application forms for tax-free bonds: “Where are all the small investors, bhaiyya ?” In his day, a bull market was never complete without retail investors jostling for IPO and new fund forms and paying hefty grey market premiums for yet-to-be-listed shares. He remembered fondly how people queued up for hours to get their hands on the application forms for Mastergain 1992 and Morgan Stanley Growth Fund.

Bonding with deposits

The vendor said morosely: “What IPOs? We’ve had only five for the whole of this year and two of them had to be withdrawn because there were no takers. We now have only offers for sale and institutional placements. Basically, the Government has been forcing companies to sell shares in the market. Some public sector companies were even sold off at a 40-50 per cent discount. But no retail investors bought them. And who actually invests in mutual funds? Retail investors have pulled out Rs 15,000 crore from equity funds in the last one year. They only like bank deposits.”

Is that why there are no shoe-shine boys around, Mehta wondered aloud. They were the ones to whom day-traders used to turn for the hottest new stocks. “Mister, where have you been? They’ve all migrated to Zaveri Bazaar long ago. Nowadays, no one wants tips on stocks. They want tips on how gold prices will move if Syria is bombed,” said the Energy stall owner.

Missing action

Mehta was bemused, but not entirely convinced. Surely if the Sensex had shot up to 21,000, there must be some investors driving it, somewhere. How could he meet them? “Oh! Electronic trading”, he remembered. Why would investors be milling about in Dalal Street? They must be trading at lightning speed through those new trading terminals at brokerages.

Zipping himself into a state-of-the-art dealing room at one of Mumbai’s big brokerages, he was greeted by a roomful of glowing LCD screens. A few terminals were manned by dealers punching in trades in a desultory manner. “Why is this place so quiet? Where are the raised voices, ringing telephones and excited senior citizens clutching their bhav copy?” he thought.

A relationship manager, spying him, ran up, rolled out a dusty red carpet and asked him. “Sir, are you here to open a demat account? We give a gold coin free. You can trade for nearly nothing too. No matter what the value of the trade, we charge you only Rs 20 as brokerage”.

“What, such pittance! How do you guys make money?”, asked Mehta. The executive said: ‘‘We don’t, sir. Hardly any retail investor trades in stocks nowadays, especially in the cash market. Five hundred brokerage firms have shut down this year. We’re all downsizing our retail business and shrinking our research teams. We’ve decided to avoid all this risky stuff and sell fixed deposits to high net-worth clients. We don’t need any research for that.”

No excitement

Well, it’s their loss. I like risk. Now that I’m here, I must punt on the market and make a few millions, thought Mehta, sitting down at a trading terminal and eagerly studying the ticker tape. Habit made him turn immediately to data on stocks at the circuit filters and life-time highs.

This is where operators usually made merry. But surprisingly, only a dozen stocks were at the upper circuit. And the list of stocks languishing at their life low was longer than the list of new highs. “Surely, there’s something wrong with this data. This looks a lot like a bear market. Let me make my trading debut on a Reliance stock,” thought Mehta. But he found only one — Reliance Industries — in the Sensex. And it was up a measly 4 per cent in 2013, huddled close to ONGC and straggling stars such as TCS and Infosys which were up 50-60 per cent. Even that senior citizen stock Hindustan Unilever had done better than Reliance Industries!

By now Mehta was getting quite worked up. “What a strange bull market this is. I can’t understand a thing about how it works. I must be losing my grip. I’m sure my protégé can tell me where all the action is”, said Mehta, speed-dialling Chetan’s number.

He was very surprised and pleased to hear from his old mentor. “Harshadbhai, it’s been a long time since you last visited us. How was Diwali and how can I help you?”, he asked. Mehta poured out the long list of questions which had been troubling him.

“I have personally seen three bull markets in my life and they were nothing like this. Retail investors are playing it safe with fixed deposits. There’s no excitement over listing gains or new funds. People are actually buying ITC and Infosys instead of Temptation Foods and Global Tele. These are very bad signs, bhai . How can honest operators make a living in such market conditions? After all, bull markets come only once in five years.”

A selfish lot

“I understand your angst, Harshadbhai,” said Chetan in soothing tones.

“But everything has become so irrational ever since we let these foreign institutional investors (FIIs) into our market. They simply keep on buying; they don’t know the meaning of the word ‘sell’. They’re even more fearless than LIC.

“They bought stocks when our GDP growth was 9 per cent and bought some more when it fell to 5 per cent. They rushed in when everyone was talking about policy paralysis and they stayed put when CBI became hyperactive. They now hold 40 per cent of all the floating stock in our market. So who will dare operate a cartel? You can’t short anything. They’ve also cornered all the small-cap stocks for themselves, forcing poor day traders to buy ITC and Infosys.

“Very selfish, these FIIs! There’s no fun or excitement for others in the market. I’ve retired from stock trading, Harshadbhai. I will let you in on a secret. We’re trying to make a start on commodities nowadays. You can make some quick money on guar gum, castor and cotton. That’s where retail investors are and FIIs haven’t discovered it yet. Come over for dinner and I’ll tell you more.”

comment COMMENT NOW