Govt's strongarm ways to cool market, backfire
In a missive to the newspapaers, the Prime Minister’s Office castigated them for publishing reports which affected the sentiments of the market.
By TNN |
MUMBAI :In a missive to the newspapaers, the Prime Minister���s Office castigated them for publishing reports which affected the sentiments of the market.
It was during the week beginning September 19 that the ���probe by intelligence agencies��� story suddenly took on a life of its own. On Wednesday and Thursday (September 21 and 22), a series of stories in both general newspapers as well as a financial daily (not ET) suggested that the IB was poised to unravel the mystery of the bull run. IB sleuths, these stories suggested, were already in Mumbai and were about to round up the usual suspects.
These stories also suggested that the PM had convened a meeting on Tuesday (September 20), something strongly denied in the PMO missive. On Wednesday, the market crashed 200 points but then recovered as FIIs bought at lower levels. However, the market breadth (the number of scrips rising, compared to the number declining) was highly negative.
ET also carried a story on Thursday (September 22), but didn���t refer to any meeting convened by the PM. ET did say that the PM had spoken to the FM, a fact confirmed by top-level sources and not denied in the indignant letter shot off by the PM���s media advisor.
It was during the week beginning September 19 that the ���probe by intelligence agencies��� story suddenly took on a life of its own. On Wednesday and Thursday (September 21 and 22), a series of stories in both general newspapers as well as a financial daily (not ET) suggested that the IB was poised to unravel the mystery of the bull run. IB sleuths, these stories suggested, were already in Mumbai and were about to round up the usual suspects.
These stories also suggested that the PM had convened a meeting on Tuesday (September 20), something strongly denied in the PMO missive. On Wednesday, the market crashed 200 points but then recovered as FIIs bought at lower levels. However, the market breadth (the number of scrips rising, compared to the number declining) was highly negative.
ET also carried a story on Thursday (September 22), but didn���t refer to any meeting convened by the PM. ET did say that the PM had spoken to the FM, a fact confirmed by top-level sources and not denied in the indignant letter shot off by the PM���s media advisor.
ET did say that the finance minister had asked the joint secretary looking after the capital markets, UK Sinha to rush to Mumbai. Mr Sinha has denied being so instructed by the FM, though he admitted being in the city to attend the board meetings of UTI Mutual Fund and Central Bank of India.
Both the ET stories were based on conversations with top level sources.On Thursday, the I-T department swung into action. Raids were conducted on some obscure brokers in Gujarat, but rumours circulated throughout that day said that ���big brokers��� in Mumbai were being raided. Curiously, these raids were all conducted during market hours and the news was accorded top priority by all TV news channels.
Given the charged atmosphere, the government must surely have been aware about the kind of signal that raids on brokers, even on the unknown ones, would send to the market. Not unexpectedly, the sensex plunged 265 points on that day, prompting much raving and ranting by some 24x7 business channels. The government, which had not denied any of the previous stories, suddenly disavowed any interest in the trajectory of the market.
The overall sequence of events seems to suggest an orchestrated attempt by the government, working through hints of strong-arm tactics, to cool down what seemed like a runaway rise in the market. Given the sad history of previous bull runs, which have ended in tears, the government���s fears are understandable, though the evidence suggests that this particular bull run may be more rooted in fundamentals.
There are, indeed, learnings which come out of the whole episode, but it���s not clear that the media is the only institution that has to do the learning.
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