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Protecting small investors

The promoters and merchant bankers of the Nissan Copper IPO find themselves on the wrong side of SEBI, writes Ashok Kumar.
None | By Ashok Kumar
PUBLISHED ON JAN 23, 2007 09:58 PM IST

The general consensus at this moment seems to be that, barring major upheavals in the secondary market; calendar year 2007 could witness a record Rs 50,000 crore mop-up in the primary market. Normally, that would have spelt good news for small investors, but does it, really?

The promoters and merchant bankers of the Nissan Copper IPO find themselves on the wrong side of SEBI following what seems to be brazen price-management (the term rigging is now passe') post-listing.

There is the very curious case of aggressive initial trading by a 'FII', about whose parentage market sources and more particularly, the merchant bankers might have a fair idea, though proving the same might require help from FEMA officials, rather than merely our friends at SEBI.

Another disturbing whisper doing the rounds at the moment is that some of the 'passionate' traders at the Nissan Copper counter post-listing are none other than the crème-de-la-crème' of the recent infamous IPO allotment scam.

If there is even a semblance of truth to this whisper, it not only reflects poorly on our market regulator, but also is a slap on the face of the fast vanishing breed of the 'genuine' small investor.

One of the main reasons, why less than five per cent of investible funds in India find their way to the equity market is this - the retail investor has repeatedly been short-changed.

Given the fixation of every decision maker from the capital market with the Foreign Institutional Investors (FIIs), little if at all any thought has been been spared for retail investors and their requirements.

Whereas SEBI's move to do away with discretionary quotas of allotment by merchant bankers and increased allotment to mutual funds (supposedly the vehicle for small investors) was a positive one, its inexplicable fixation with MAPIN ID's and MIN came as yet another rap on the knuckles of the retail investor.
So, here we are with a tragic-comic scenario where the perpetrators of the IPO scam seem to have walked away literally scot-free. Agreed, these are relatively early days yet, but don't' we all remember only too well the 'not so unfortunate' fate of their very 'illustrious' predecessors who answered to the names of Mehta, Dalal, Bhansali and Parekh.

As for the retail investor, better known to our politicos as the 'Aam Aadmi', well, they are cooling their heels, standing in serpentine queues with loads of papers (attested at that) to establish their bonafides under the KYC norms and to get a MIN to invest in / disinvest from mutual funds.

Mind you, the PAN card forms the cornerstone of all these efforts to 'protect' retail investors. When there is a PAN card in place, the wisdom having a MIN is beyond most rational thinking beings, but no, SEBI is very clear that the small investor must be protected! And how! Amen to that.    

In the meanwhile though, given the flood of IPOs several Nissan Copper clones could well hit the market and mysterious FIIs will propel their share-price post allotment. God forbid, should they be found out, some harsher measures may be in order, of course to 'protect' retail investors. 

Sadly, it's not the scamsters who are quaking in their boots thinking of this, but the beleaguered retail investors.

(Ashok Kumar heads LOTUS KNOWLWEALTH and can be contacted

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