The week ahead will be an important one for the markets. Mid-week on Wednesday the 15th August is a holiday on account of Independence Day. This means we would have two trading periods of two days each separated by a holiday. The government is under fire for not addressing issues being faced by a common man on account of inflation and the current drought. The markets are unhappy with nothing being done on the reforms front and the huge fiscal deficit. The current government has completed 39 months of the current term and has very little time left to actually introduce reforms before it gets into the election mode.
SEBI the regulator has an important board meeting scheduled for Thursday the 16th of August at which it would take decisions on the primary market amongst other things. Some of the issues being talked about include raising the minimum lot for application, a safety net for investors and tighter norms for companies without a track record of profit. What is important to note is the fact that SEBI is now accepting the fact that issues have been overpriced under their regime and promoters and merchant bankers are getting away with it. The concept of safety net would put pressure on pricing and ensure better pricing for the investors.We would know of what decisions are taken in the next four days.
The government wants to kick off the divestment programme with issues from SAIL, unlisted RINL, BHEL and residual stake sale of Hindustan Zinc and Balco. The divestment is long pending and one hopes that the same does happen as early as possible.
Corporate Governance is becoming a major issue in the country and we have umpteen cases of wilful default in our corporate world. Last week it was the report brought out by a Canada based research house on the India Bulls group. The modus operandi of this group has been brought to the fore after some police complaints have been made against the analyst and the company.
This probe raises interesting questions some of which I would enumerate. The company Veritas claims to have no interest in broking or any other fee based income associated with a broking company. They follow a research based subscription model. The company typically researches a company and issues a brief report on the same for all and sundry which is available for public consumption. The detailed report is on subscription. The catch is that the detailed report is sent first to its clients and they are allowed to take a position on the same. Once the same is done the summary report is made available to all and the report is highlighted using media both print and electronic. The stock then reacts accordingly. The issue raised here is whether there is any regulator they are accountable to? If so to who are they accountable? Are there activities similar to a cartel where there is concerted action taken against a company or a group with one intention to move prices significantly?
Some time ago there was a report on DLF which was issued. Veritas came out only with the summary and it appears that the detailed report never happened. Why did this happen? Did some sort of underhand deal take place? One will never know but very clearly the feeling one gets is that there is a lot of scope for give and take in the way this company functions. It would be interesting to know how the SEC (US regulator) looks at this company and what are the guidelines imposed by them on Veritas. This issue is not yet dead and would be talked about for some more time.
In the meanwhile enjoy Independence Day and look forward to a hectic time thereafter.
