SEBI’s Rip Van Winkle act

After years of watching on helplessly as ‘grey market’ operators squeezed every ounce of blood out of hapless retail investors, SEBI seems to have woken up to the fact that there are ways of retaliating.

And just like the young Indian ODI cricket team that landed a knock-out punch to the boorish Aussies in the recently concluded tri-nation series, SEBI too has come out, all guns blazing at the ‘grey market’ operators, and perhaps, some of their ‘patrons’ who traverse the financial markets with a respectable veneer.

In a proposal that will have far reaching implications, SEBI has announced its intention to speed up the allotment process post-IPO and minimize the lead time to listing. If indeed, the objective to list within three days of closure of an IPO is achieved, the funeral services that the disastrous listing of the recent mega-power issue of the ADAG group commenced in the grey market, will well and truly be completed.

While skeptics may wonder if at all this is possible, a gentle reminder of how quickly we migrated to the T+2 system from archaic ‘as and when’ system in the bad old days when the BSE ruled the roost should be a source of hope.

After cutting these manipulators to size, SEBI is reportedly also considering seeking upfront payment from institutional investors to curb the suspected malpractice of making dummy bids within minutes of an IPO opening by coughing up a token amount. This, to my mind, will have an even more far-reaching impact and level the playing field for retail investors who have always got the wrong end of the stick while investing in IPOs.

Now, when one looks at these initiatives in conjunction, it becomes clear that investment banking companies with a banking arm (or should it be the other way round ?) will no longer be able to ‘milk’ the huge float that results from a combination of a huge oversubscription and the long time-lag to listing.

On the stock-market front though, there is now little left to cheer. Soon after the sell-off commenced in mid-January, I had opined in this column that between Greed and Fear lies Hope and Despair. There were two events that the markets hoped, might help trigger a miraculous market-recovery. Alas, neither Anil Ambani’s much hyped bonus offering to the shareholders of Reliance Power nor the Union Budget managed to live up to these unrealistic expectations and now, with hope out of the way, despair has set in.

After proclaiming from the rooftops across most months of 2007 that we ranked amongst the highest in terms of stock market returns in the emerging market pack, we seem inclined to sweep under the carpet that we seem to have done the reverse in January 2008.

Towards the end of January, in this column I had suggested that it might be prudent to undertake an Asset Class Rebalancing exercise. Those who took the cue and picked up Gold, would have laughed their way to the bank by now.