Is India headed towards end of ‘Equity Culture’?

Mumbai, December 27, 2011 : We are approaching year end on very diminishing note, whereby every news channel will show statistically  how much different scrips had lost in last one calender year, whether it is SBI or Reliance or Jet Airways. What a year it was? Everything and anything which could have gone wrong has gone wrong, whether it was 2G Saga or CWG Scam or Protest of Anna Hazare for a strong Lokpal Bill. While analysing the historical data long list of losers where in some case some of the c

ompanies has lost even more than 70% of their market capitalisation in past one year. This is alarming and these figures and data is indicating something that “Wealth” is no longer a welcome word and “Equity Culture” as we precisely point out is on the verge of collapse.

Widening divide between Government and India Inc.
One parameter on which the performance of world renowned economist Manmohan Singh’s government could be measured is the frustration of Industry Leaders and no support for Industrial Growth. More and more industry captains are writing open letter to PM but no counter action is being initiated from government side. Industry is loosing confidence in government and that could prove sucidal for a county that could be transformed in to one of the biggest capitalist society at the same time remain democratic.

Destruction of Institutions
Another big hurdle for market and investor confidence is development such as the controversial appointment of SEBI chief U. K. Sinha, if allegations are true then it may undermine the independence of such an important Regulatory body such as SEBI. IF head of such institutions lacks integrity, honesty and fails to dischage its duty then consequences could be very disastrous.

Recently SEBI has come out against 7 IPO companies where investor has lost virtually full principal they invested during IPO. One thing about the timing and quantum of such move is making investor more worried that even they(SEBI) would have acted swiftly when such incidents were taking place they neglected and ignored to such an extend that it became trend and some very smart people, called ‘operator’ in market terminology got hold of the situation and exploted to the best possible manner. Bottom line is SEBI is showing that it is doing ‘something’ but actually it is mere ‘Post moterm’ of disease whereby benchmark should be it (problem) should have been diagnosed way before it took place and make regulatory and online surveillance so strong and effective that such an incident could have been detected real-time and remedy could have implemented then and there itself.

Divestment Blues
Why to blame only those companies whose names are included in SEBI order, even Government has looted investor’s money openly. Shipping Corporation of India (SCI) (lost more than 60% after FPO at Rs. 140 a share), Steel Authority of India (Even without Follow-on issue market cap lost more than half), NTPC, PFC and all other issues except Coal India and Powergrid, Long term investor has lost more than 50% of their investment and Manmohan singh and Pranab Mukerjee want us to believe their version of India Story and 9% growth. It is quite logical to ask a very simple question why should anybody take risk where there is very little scope or no scope for reward.

Politics is taking front seat over Economics and every man on street is openly criticizing every move of Government whether it is Inflation management, Fiscal Deficit mis-handling or handling corruption. Government shocked everybody on the street when they come out with a plan to buy back of PSU companies in order to meet its divestment target of 40,000 crore.

Conclusion
In 2012 and afterwards, Indian Economic situation, if handelled properly could be proved very effective not only to meet Socio-Economic goal which every political party talks in their manifesto or ‘value creation’ to share holder which every company talks about in their annual report. The flipside is if we continue to function as we did in 2011 we are certainly headed towards “Collapse of Equity Culture”. Long live Capitalism. Now RIP.