Parliamentary Panel Frowns At 'Harshad Factor', Slump
A section of the MPs, as part of the standing committee on finance, have raised concern over the `Harshad factor' and `death of the primary markets' after meeting a large section of the capital market players, including the Bombay Stock Exchange, National Stock Exchange and the Securities and Exchange Board of India yesterday.
According to sources, issues like the depressed state of the markets, absence of the small investors and the recent payment crisis were also discussed.
According to MP Gurudas Das Gupta, a member of the committee, the Harshad factor has been an issue of concern.
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Ironically, the standing committee has received contradictory reports on the payment turmoil witnessed at the capital markets in June. While Sebi has stated that there was a payment problem, the BSE is understood to have told the committee that there was no payment crisis. A committee member when asked to comment further said, ``They have aided their own community in the bail-out process. So they (BSE) would not consider it a crisis.''
According to a source, the standing committee was informed that the payment crisis was a result of not just the Harshad factor but also the financial performance of some of the scrips which witnessed volatility, like Sterlite and Videocon. ``The Harshad factor added fuel to the fire,'' he said. Concern has also been drawn on the financial performance of corporates, following the Q1 results. A committee member expressed concern over the pace of growth in some industrial sectors and particularly the financial performance of the larger corporate groups _ the Birlas, Tatas and Singhanias.
This was the first time that the 30 member committee has listed out a comprehensive questionnaire to the capital market players, banks and financial institutions and the top industrialists.
"We have been told that the Asian crisis did have its impact on the Indian region. But while the liberalisation process is good in concept, there is concern of why the Indian industry has collapsed. Here the financial institutions must play a promotional role in restructuring of companies," he said.
The committee was also informed of companies which faced trouble in raising monies abroad through the ECB/GDR route in the post-Pokhran phase. "If a section of the industry is in peril, we must take notice of it instead of allowing them to be pushed to the wall at this stage through further competition," he added.