Stock Markets and SEBI's Directive - Mynews India

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In a professional association there was a question “Is SEBI right in asking investors to stay away from market related astrology tips?” asked by a member recently.  Incidentally, I am also a member of the community.

We have to analyze this question in two parts, from the angle of Stock Market and from the angle of Astrology.

Stock Market

Price is the function of demand and supply in any market.  But, in the stock market Greed and Fear do play important roles.  There are two aspects to it, speculation and investment.  Trading is anything in between.

‘Trading in stock market is a zero sum game’ it is said and rightly so for majority of the traders.  Stock market has the knack of tripping the investors even in the best of times.

Fundamentals would be ignored for a long time to frustrate you.  You will wonder whether some unknown information to you is factored in the price. Level of activity, that is, volume in a counter may mislead you to take position only to regret later.

For FIIs, the world is the market place and India is a part of it.  Many a time it will be difficult for an ordinary investor to understand their logic as he is exposed only to Indian markets.

The interrelationship between Commodity, Currency and Equity markets can not be understated.  The old economy stocks for example on account of commodity markets and software, BPO and export oriented companies on account of Currency markets are affected to put you in a fix.

It is difficult to quantify the cascading effect of boom or depression in an industry on other sectors.  Since the stock markets discount these factors well in advance and swiftly, over reactions play havocs on a regular basis, needless to mention about the acts of God.

Human mind always tends to believe everything that appears to be favorable.  Therefore, clinging to some statistics or information to the detriments of the investment is very common even for seasoned investors. If buying on rumor is risky, buying on confirmation of a development or after the news is out is more risky, as the saying goes, ‘buy rumor and sell news’.

Artificially jacking up the prices prior to rights issue or public issue of a group company is the best example to understand that the manipulation is at work.  It is not uncommon to note that the prices nosedive even before the last date of issue if it is comfortably oversubscribed by that time.

Where does the Astrologer fit into this puzzle?  How does the Astrology work?  Let us consider the following options

1. Horoscope (Company or Investor)

2. Numerology (Company or Investor)

3. Timing â€" for buying and selling

4. Account Holder (Wife or son whose stars may be shining brightly)

The permutations and combinations are endless if you take into account the industry also. (metals or cement, sugar or software and so on) We see advertisements which are stock specific, investor specific with remedies through Yantras, name change, etc. and time specific according to one’s horoscope or numbers.

Astrology

It can be argued that SEBI is not right on the following grounds.

Profession

No doubt, it is a profession exploiting the ignorance of the people in the name of stars as there is no ground for it.  The proponents of this theory may support gambling of all sorts, lottery and so on.  Please wait.  I am not telling ‘investment’ in stock market is gambling.  If it is speculation or trading and astrology associated with it, it is worse than gambling, like madness intoxicated.

 Already the introduction of Futures and Options, and the roaring success of Stock Futures in India unlike any other country in the world made the stock market a gambler’s den.  Commodity trading through exchanges is no better.  In fact they are vying with each other for turnover and finding ways and means to hook the investors, and make the investors as traders.

The original concept of hedging has been relegated to sidelines.   Trading in F&O by investors is not definitely for hedging purposes in the context of Indian markets.  At the best it may be on account of arbitraging partially.

Fundamental Right

The case is very weak from this angle also.  Smoking is your right.  Drinking liquor is your right.  However, advertisements of these products are banned.  In US the tobacco companies faced lot of litigations, and in most of these cases the judgment went against these companies.  Our astrologer friend advises his clients not based on the factors on earth, but based on stars!  If you allow him to pursue his business without restrictions, you need not go to an astrologer to say “the investor is doomed’.

Implications

If there are no restrictions, the unscrupulous elements may come up with great ideas to make fools of the public with ‘acknowledgments’ and ‘references’ claiming extra ordinary talents and supernatural powers in doling out the predictions.  The broking community needs to wake up to this challenge.

Right to believe

It is not a surprise to see a topic of this nature raised in a professional association, for many reasons. Belief is nothing to do with education, and we are all humans. The idea may be to start a discussion for the benefit of investors. The discussion would have been initiated to highlight the role of SEBI in safeguarding the interests of the investors.

The purpose may be to create public opinion against the unscrupulous elements in the society exploiting the investors in the name of astrology. Mr. Reddy may believe astrology but, dislikes the practice of discrediting the profession of astrology by some quacks. (Misuse or Abuse)

In any case, it is essential to keep the discussions alive in order to eradicate such practices completely.  It is important especially in respect of stock markets since a number of small investors have parked their hard earned money.

Otherwise, we have nothing against astrologers who make their living on belief and faith of the public.  To believe or not to believe anything is the individual’s right, and there is no different opinion about that.

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