Bull runs on the exchanges - a sense of deja vu?

By C. R. L. Narasimhan

The arrest by the Mumbai Police on Monday of the leading diamond merchant and film financier, Mr. Bharat Shah has shocked not just those two businesses. It also sent the stock markets into a tizzy.

The Sensex dropped 63 points on Monday when the news of his arrest, to quote a newspaper, ``spread like wild fire''.

On Tuesday, underpinned by the announcement of excellent Q3 results by Infosys on top of a similar showing by Satyam a day earlier the market stabilised somewhat. On Wednesday, however the downturn has been resumed.

Media stocks, until recently in the most favoured category, have taken a sound beating.

The stock markets' behaviour in the aftermath of Mr. Shah's arrest ought to be considered intriguing to say the least. But when it is reported that Mr. Shah is closely connected with the leading stock exchange bull, Mr. Ketan Parekh, there is much less surprise.

The latter who is known to take huge positions in select stocks and can single handedly change the markets has the aura of an invincible bull around him.

Though maintaining a much lower profile than other past-bulls who have ruled the BSE, Mr. Parekh has been in the news on at least two occasions recently. The first was in an unsavoury context of income tax arrears owed by him.

The second was when he reportedly snapped up the ICICI building in Mumbai's Backbay Reclamation area.

It is not merely the connection between these personalities and their links, however roundabout, to the underworld which are of concern. It is for the Mumbai Police to prove Mr. Bharat Shah's links to crime.

The big bull's links to Mr. Shah and therefore to the underworld may not be part of a police investigation.

The only downside seems to be the impetus such reports give to the existing volatility on the bourses. They are attributable to factors beyond a normal analyst's comprehension.

Do the markets have an image problem? That they could be swayed by even tendentious links to criminal syndicates suggests that they do.

Yet even allegations of that nature have no more than a momentary impact and are ``discounted''. Which leads one to look at the stock exchanges' recent history.

Exactly 10 years ago, the BSE was dominated by another big bull with no known antecedents. By the end of 1992, the BSE was virtually decimated.

Since then the markets are supposed to have acquired a new look, with higher standards of governance and integrity. Yet a decade later there is an almost universal interest, bordering on adulation, in one or two operators.

Truly a feeling of deja vu. The difference between the Nineties and now is that the Government seems hell bent on propping up the markets: note, for instance, last year's instructions asking banks to invest more in shares, as ill-advised a move as any emanating from the Government which knows more than any ordinary investor about the less than sterling qualities of market men.

Should the stock exchange participants have a set of ethical standards different from, say, the bankers?

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Section  : Business
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