For the record, Mr Narayanan told a conference on Security Policy that, Isolated instances of terrorist outfits manipulating the stock markets to raise funds for their operations have been reported. Stock Exchanges in Mumbai and Chennai have, on occasion, reported that fictitious or notional companies were engaging in stock-market operations. Some of these companies were later traced to terrorist outfits.
But the Chennai exchange is defunct and only trades through a brokerage subsidiary that is a member of the Bombay Stock Exchange (BSE). Almost all of Indias stock market activity occurs through Mumbais two national exchanges, and price manipulation remains rampant despite the market regulators newly installed Integrated Market Surveillance System (IMSS).
What exactly did the NSA mean by fictitious or notional companies Indian company law allows the proliferation of notional (or shell) companies that often exist only to hide trails to a variety of investment companies. There are also scores of virtual shell companies that are listed on the BSE which are often used as tools for reverse mergers that allow privately-held companies to be listed without disclosure requirements mandated for public issues. There are also the low-cap companies, which are easily and profitably ramped up during every big bull run. If any of these were found to have links to terrorist groups, then the Securities and Exchange Board of India (Sebi) is keeping it a big secret.
If the government had found even a single instance of terrorist links, it ought to have been publicly prosecuted to establish the credibility of Indias intelligence agencies
Overseas intelligence agencies had once speculated that Al Qaeda profited from shortselling in the run up to 9/11, but they too have found no conclusive evidence to back this. This does not mean that market manipulation to fund anti-national activity is not a possibility. It is. In fact, intelligence agencies ought to pay a lot more attention to the antecedents of companies that have been awarded sensitive contracts to digitise and automate voter cards, driving licenses and so on. Many of them have been indicted in various capital market scams or worse; they also been given the job without any clarity about regulation, inspection and supervision. Their ability to cause havoc through data tampering should worry us all.