After a long long time, since the Harshad Mehta scam, has Sebi taken such desperate steps, prompted by a steep fall in the market capitalisation of a majority of stocks leading to a fall in investor confidence.

Measures taken to achieve this task include increasing margin on net outstanding sales position from 10 per cent to 25 per cent, reducing gross exposure of brokers, compulsory squaring off of outstanding sales position by March, 15 etc.

It has even gone up to the extent of banning the stock lending and borrowing mechanisms of all stock exchanges except BSE and NSE. All the steps taken give an indication that Sebi does not want anybody to sell.

While Sebi is striving hard to give a boost to the share prices, it seems doubtful whether it would be able to attain its objective. The volumes have witnessed a sharp fall after the implementation of these steps. The volume on BSE on Monday stood at Rs 1,409 crore which is less than 35 per cent of its average daily turnover of Rs 4,000 crore-Rs 5,000 crore.

Compulsory squaring off of outstanding sales position would definitely give a push to the share prices but would it be able to counter the delivery based selling pressure which would come despite a 25 per cent margin being levied on all sales? The movement of the technology stocks depends to a very great extent upon Nasdaq, which is also facing a bearish trend.

Averting a possible payment crisis is definitely the job of the regulator, but over indulgence in the market, which restricts its natural flow is definitely not.

Yahoo!
Recently, Yahoo!, one of the most famous horizontal portals, has further pared down its revenue estimate for the 2001 calender year. It is struggling to achieve break-even point that was widely expected in the current year.

The company has attributed the downward revision of earnings to the slowdown in adspend that resulted from the slackening of the US economy.

Right from the inception, dotcom companies have been heavily banking on advertising to make money. This strategy was fraught with the basic weakness that it undermined the importance of audio-visuals in marketing world. As a result, even though they could comfortably beat print and radio media, television still remains a powerful medium and far ahead of the competing media. Broadband technology is in its nascent stage. Until it really takes off with streaming video facility, no one would bet on Internet as the most preferred medium of selling products.

However, this argument does not support the case for `Subscription model of revenue.' In fact, many of those who relied more on the subscription model of revenue have lost the `com' from their name. This model, at best, could have been used as an additional revenue stream.

More dotcoms are expected to go the `Yahoo!' way if the slowdown in US economy is not arrested. In the era of globalisation, sagging US economy may have serious repercussions for other economies.If the leading portals such as `Yahoo!' and `Rediff' are unable to attract advertising, then the lesser known ones have reasons to worry about .

Notwithstanding all the recent developments, shares of Yahoo are still quoted at around $17. It shows that investors continue to be optimistic about future prospects. Their hopes may be jolted if the current trend of slowdown in US economy continues longer. However, there is a silverlining.

Once the weak dotcoms are out of the race, those who manage to survive the ongoing difficult phase, will emerge stronger in less competitive cyberspace.

Prashant Kothari & Manish Joshi