SEBI and ministry of finance remain in their own world, as an important indicator of the spread of equity cult sputters
If the disinvestment of shares in public sector undertakings (PSUs) is a part of the Modi government’s grand plan to bridge the fiscal deficit over the next few years, it needs to pay serious attention to markets. Moneylife has repeatedly pointed out that India’s retail investor population has halved in the 25 years when the capital market has been under the watch of an independent regulator. Things are worse for companies. They have to deal with mindless tinkering with disclosure and reporting rules, onerously impractical responsibilities dumped on independent directors and draconian punishments prescribed through amendments to the SEBI (Securities & Exchange Board of India) Act and the Companies Act, 2013. No wonder, as pointed out by a report on 20th January in the Business Standard, the number of companies that have de-listed from the bourses outpaces new listings.
The numbers are worrying. Prime Database has pointed out that only 15 companies have been listed on the bourses since 2012, while nearly thrice the number (42) have de-listed. Essentially, any company that can access private money does not want to go through the rigour of mindless and costly compliance.
This is bad news for ordinary retail investors who, ever since the FERA dilution of the 1970s and the Reliance-led equity cult of the 1980s, had gained significantly by investing in initial public offerings (IPOs) of blue-chip companies and staying invested for the long term. Ironically, the equity cult ended in the early 1990s because the government unleashed thousands of fly-by-night companies on the market when it scrapped the office of the Controller of Capital Issues (CCI) and replaced it with SEBI without putting in place any check or verification of companies, their promoters or business plans.
The past 25 years have been spent on making impractical rules rather than making the markets free from dubious corporate behaviour and stock manipulation. Consequently, despite the euphoric, eight-month rally after Narendra Modi took charge as prime minister, the primary market remains dead and the average, long-term, retail investor remains out in the cold.