In Search Of Small Investors

Speaking at the seminar, the BSE president, M G Damani, reiterated that the exchange would arrive at a re-classification of listed scrips depending on, amongst other things, the frequency of trading, the traded value and the quality of disclosures in the initial public offer (IPO). The BSE intends to create a separate class of securities, which it euphemistically calls the "buyer beware" group and the rest of the markets call Dharavi scrips after the celebrated slum area in Mumbai. The objective of the exercise is open to question. Firstly, the buyer beware caveat applies to the entire stock market; anyone who dabbles in it can be expected to realise the possible losses lurking therein. Maybe it is true that the price history of some scrips calls for added caution. But what can be a better pointer to the company and its scrip than the price history? What purpose, then, does the classification serve except to perpetuate a false sense of security in the scrips not so derisively labelled?

 

Secondly, it is no business of the exchange administration to be making subjective opinions on the scrips listed therein. Once listed, every company has a right to be treated at par with others. The exchange only has a right to either admit or deny listings, but once done, there is a moral onus on it not to discriminate between companies. This is especially true in the case of negative discrimination, as the exchange proposes to do now. The urge to assume extra-constitutional powers becomes all the more important because it is being sought to be justified in the name of the retail investor. This urge needs to be curbed.

Harking back to the heyday of the equity cult makes no sense either. Marketmen realise that the days when every other person with modest amounts to spare was playing with shares are truly over. Those small investors have gone back to the security of bank deposits or into mutual funds. In a way, that is a positive development for the market. What are left now are the relatively larger investors, in the retail segment. And these people are more firmly cued into developments in the markets. It is unlikely that quick fix solutions would move the target audience. What is required, therefore, is to hasten the pace of reform in the markets.