Regulators say that only 15 % of the money that is waiting to flow into India has actually come in so far. Consequently, they are willing to ignore Indian black money that continues to round-trip its way through foreign institutional investors (FIIs). This is one reason why there is no attempt to cool the market, even on a short-term basis, by revising margins upw-ards to force some unwinding of leveraged positions. Pertinently, the bull party seems limited to a couple of hundred index stocks. As this paper reported (27/03), most stocks in B-categories and below have lost considerable ground, even as the benchmark Sensex sizzled up from 9,000 to 11,000. As many as 1,600 out of 2,700 stocks that are traded actively on the BSE have moved south. Other indicators, such as the information on advance tax payments by large companies, suggest that earnings and profit numbers in the recent quarter are under pressure.
The results season is expected to dampen the bull frenzy. The question is whether some corrective action is needed even earlier. Several analysts believe that it is time the regulator took steps to temporarily cool the market before an external event triggers a correction or, worse, a needless panic. Our regulators have no experience in dealing with volatility and price signals emanating from the ballooning volumes in the derivatives segment and they would do well to err on the side of caution. As for the small retail investors, they would do well to cash out and stay away from the capital market at this time. Subscription numbers of several newly launched mutual fund schemes indicate that investors, as usual, are rushing with their money to catch what may well be the top of the bull run. While mutual funds are definitely the safer investment bet for retail investors who have no information or research strengths, even they cannot work miracles in an over-heated market.