Somaiya seeks probe into stock market crash
BJP leader and founder of Investor’s Forum, Kirit Somaiya, has demanded a comprehensive probe into the stock market crash, role of the regulators and the finance ministry.
By ET Bureau |
MUMBAI: BJP leader and founder of Investor���s Forum, Kirit Somaiya, has demanded a comprehensive probe into the stock market crash, role of the regulators and the finance ministry. He has even held LIC chairman responsible for the ���disaster��� that has struck the state-owned insurer���s Unit Linked Investment Plans (ULIPs). Mr Somaiya, addressing a press meet here on Monday, expressed fears that the LIC was going the UTI way.
���We don���t have faith in finance minister P Chidambaram since he was the one who encouraged small investors to invest despite signs that most of the bull run was driven by speculation and manipulation. Only the big players, especially the real estate majors, have made money, thanks to this manipulation. We want the prime minister to
order a probe,��� Mr Somaiya demanded.
The finance minister, he alleged, had actively encouraged creation of ���speculative and manipulative trading systems��� in India as a spillover from the developed countries. ���These systems have put in jeopardy the economic growth of the developing countries now,��� he said.
The former BJP MP also demanded a probe to establish how much liquidity had gone into the real estate sector in the past couple of years. ���The better chunk of money put in by small investors in financial instruments like mutual funds, ULIPs, IPOs, and Fixed Maturity Plan (FMP) has gone into real estate,��� he alleged.
In addition, unregulated flow of the fund from banks, foreign financial institutions, private equity and hedge funds, non-banking financial institutions (NBFCs) was allowed into the real estate sector. But we have no idea exactly how much liquidity has exactly been made available to the real estate sector. This has to be established,��� Mr Somaiya stressed.
Referring to the crash in the share prices of real estate firms, Mr Somaiya demanded a probe from the Sebi and the Department of Company Affairs into the valuation system. ���The agencies which certified the valuation of shares must also be probed for their role,��� he said. He also asked for change in the method for charging premium at the time of IPO or public issue.
���Responsibility must be fixed with lead mangers, merchant managers or whosoever is responsible for recommending such high premiums for real estate companies stocks,��� he said.
He said several representations had been made to the Insurance Regulatory and Development Authority (IRDA) about the ���unscientific manner��� in which LIC was investing in the stock markets. ���In fact, the IRDA in September 2007 asked LIC to be cautious.
���We don���t have faith in finance minister P Chidambaram since he was the one who encouraged small investors to invest despite signs that most of the bull run was driven by speculation and manipulation. Only the big players, especially the real estate majors, have made money, thanks to this manipulation. We want the prime minister to
order a probe,��� Mr Somaiya demanded.
The finance minister, he alleged, had actively encouraged creation of ���speculative and manipulative trading systems��� in India as a spillover from the developed countries. ���These systems have put in jeopardy the economic growth of the developing countries now,��� he said.
The former BJP MP also demanded a probe to establish how much liquidity had gone into the real estate sector in the past couple of years. ���The better chunk of money put in by small investors in financial instruments like mutual funds, ULIPs, IPOs, and Fixed Maturity Plan (FMP) has gone into real estate,��� he alleged.
In addition, unregulated flow of the fund from banks, foreign financial institutions, private equity and hedge funds, non-banking financial institutions (NBFCs) was allowed into the real estate sector. But we have no idea exactly how much liquidity has exactly been made available to the real estate sector. This has to be established,��� Mr Somaiya stressed.
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���After market valuation of real estate majors was allowed to go through the roof, they came out with IPOs with heavy premiums and today, we know what is the valuation of all these reality firms.���Referring to the crash in the share prices of real estate firms, Mr Somaiya demanded a probe from the Sebi and the Department of Company Affairs into the valuation system. ���The agencies which certified the valuation of shares must also be probed for their role,��� he said. He also asked for change in the method for charging premium at the time of IPO or public issue.
���Responsibility must be fixed with lead mangers, merchant managers or whosoever is responsible for recommending such high premiums for real estate companies stocks,��� he said.
He said several representations had been made to the Insurance Regulatory and Development Authority (IRDA) about the ���unscientific manner��� in which LIC was investing in the stock markets. ���In fact, the IRDA in September 2007 asked LIC to be cautious.
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But LIC continued to invest heavily in market and promote ULIP schemes over traditional insurance products. In fact, a letter I received in January from joint secretary, insurance and banking, the finance ministry, has overwhelmingly supported promotion of ULIP-related schemes over traditional insurance products,��� he said.Download
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