Markets not manipulated; Bhave's homilies for retail investor

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New Delhi, Nov 22 (UNI) SEBI Chairman C B Bhave today ruled out any manipulation of the stock markets or the possibility of a scam and dismissed the notion that Foreign Institutional Investors (FIIs) were only sellers on the bourses, which have been in the grip of high volatility for quite sometime now.

''Let me use my words carefully. As of now we have not been able to detect any scam,'' Mr Bhave said participating in a session at the 'Hindustan Times Leadership Summit' here.

He was speaking on 'Safeguarding Investors in an era of market volatility' and the session was conducted by Udayan Mukherjee, CNBC-TV Managing Editor.

The question that the anchor posed to Mr Bhave was the oft-repeated charge as to whether market manipulation led to the market crash, SEBI Chairman replied in the negative, saying that when an investor is in grief having lost his money there is a tendency on his part to find fault with someone or something other than himself.

He said the market regulator has been doing online monitoring, keeping a watch on the pattern of transactions.

He said an enquiry, however, is ordered by the regulator only when there is definitive proof against an entity relating to manipulation.

Mr Bhave said whatever information SEBI has, it makes it public and thus its system was quite transparent.

He said it would be unwise to paint everyone with a black brush.

Given the data at its command and on the basis of its analysis, so far it has not found support of any widespread market manipulation.

Mr Mukherjee then repeated his question, saying that was there a possibility, as in the previous bull runs, of a scam.

Mr Bhave said, ''so far we have not been able to see any scam.'' He gave interesting data to indicate as to who was buying and who was selling on the stock markets. The figures pertained to the period September one to November 14 this year.

He said the four entities which are involved in these transactions are: FIIs, Mutual Funds, Proprietary Accounts of brokers and others, namely non-institutional investors.

He said during the period, FII's were net sellers to the magnitude of Rs 22,000 crores; Net equities sold by brokers were of the order of Rs 700 crores; Mutual Funds bought stocks worth Rs 1,000 crores, Domestic Financial Institutions, which are mostly Banks and Insurance Companies, bought stocks worth Rs 16,000 crores and Domestic non-Institutional Investors bought stocks worth Rs 5,600 crores.

Mr Bhave said it was thus wrong to presume that FIIs were only net sellers. He said the ratio of buying by FIIs to net sales was 3:1.

He said the analysis was carried out on the basis of published data.

Mr Bhave said it was wrong to draw the conclusion that everyone, including the retail investors, were selling in panic. The FII's and other entities that were withdrawing money were mostly those who had leveraged funds or whose clients had leveraged funds and there was redemption pressure.

He said the story is that equities were moving into the hands of those who exercised patients and, for one reason or another, not withdrawing their funds.

To a question on retail investors having lost of money due to short selling, Mr Bhave said a regulator's ability to act in such matters is limited, the only option being not allowing investment below a ticket size. This is what SEBI had done on receiving complaints of this nature.

He, however, said there was need to intensify and speed up investor education in this regard as also on other issues.

Asked whether the Sensex was an indicator of the economy, Mr Bhave said economic performance is impacted by several factors including not only the GDP figures, but future expectations in this regard; investible surplus, and what is happening around the world.

Asked about the safety of Fixed Mutual Fund Plans, Mr Bhave said most mutual funds have assets in the AAA category or AAA plus category.

He said mutual funds have withdrawn money due to the liquidity problems and with the government opening a special window in this regard, the problems seems to have been taken care of.

Asked as to what explains the fact that a real estate stock was hammered 55 per cent in just a few day and thus how could valuations have changed overnight, Mr Bhave said a line needs to be drawn between erosion of market capitalization and erosion of net worth.

The perceptions in the market mostly pertain to market capitalisation.

Mr Bhave had some good advice for the retail investor: it is well neigh impossible for anyone to predict the highest or the lowest of the market; It is similarly difficult in a day as to predict as to how the market will behave; do not put all your savings in the equities market as it is risky; do not leverage money to invest in the stock market; invest money in stocks only after taking into account emergencies and committed amounts into account .

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