Does this mean that Indian markets can defy a mind-numbing serial blast, but crumble under the wave of international selling due to rising crude oil prices In fact, Wednesday on the markets was not as upbeat at the numbers would suggest. The fabled Mumbai spirit is indeed a reality, but it is born out of necessity and the knowledge that neither politicians nor the bureaucrats can be relied upon. Traders I spoke to were depressed, not defiant; many were up most of the night, helping those who were stranded, injured or looking for their loved ones. Many had not gone home or had just returned from condolence visits and there was very little business. And they were quite perplexed at the flag-waving defiance signalled by the ferocious rise in the Sensex.
The post-bombing rise in the Sensex may have been a desperate attempt to control market sentiment through concerted buying. There were, clearly, vested interests. On Tuesday morning, a top honcho from a large industrial house was telling me that we are now set for a big rally that would see the launch of several large Initial Public Offerings (IPOs). He suggested that foreign investors were set to return in a big way, even though the market was rather downbeat last Monday. Was this inside information Can people still control market trends The answer lies in the exaggerated bullishness of Wednesday followed by the slumpit may be possible to swing investor sentiment for a short while, but nobody can dictate market trends anymore.
The Sensex as a barometer of Mumbais resilience and derring-do began in 1993, after a massive blast knocked off the BSEs basement and damaged the trading ring. It happened on a Friday, March 12. The BSE was Indias premier bourse and MR Mayya, then its executive director, decided, with support from a strong state leadership, that the exchange would reopen for trading as usual on Monday, March 15. The Sensex rose that day, but it must be remembered that average daily trading volumes were then under Rs 200 crore and just two stocks, Tisco and Reliance, could swing the Sensex. The National Stock Exchange did not exist and there was also no concept of automated, nationwide trading on a single screen.
One may argue that moving the Sensex today, when daily volumes exceed Rs 50,000 crore (including derivatives) is impossible. But those who spend the day watching their trading screens will tell you how sentiment can be temporarily manipulated through concerted buying and the help of arbitrageurs and day traders.
The volatile swing, post-blasts, raises issues on quality of foreign money
A big chunk of FII is tax-evaded money coming back with full mobility
At least now plug the gaps that allow such easy laundering of funds
Obviously, attracting this money is a big-bucks business opportunity. That is why a broker tells me that he gets visits from at least a couple of European Bank representatives every week, seeking customers interested in transferring their money abroad and setting up overseas investment vehicles to bring it back. Typically, their business cards have only mobile phone numbers and no designations. Their investment proposals are in writing, but on plain white paper.
The broker also says that American banks rarely solicit such business. After September 11, the US has correctly clamped on money laundering and the rules are stringent enough to act as a real deterrent. The Americans realise that it is crucial to choke terrorist funding by turning the spotlight on the laundering of money into tax havens. It is time India learnt something from the US. The same porous system that allows billions of dollars to round-trip their way into the capital market also allows another set of people to finance terrorist activity. Will the bomb blasts at least provide an impetus to plug the loopholes that allow such easy laundering and transfer of funds