Welcome To The Hot Seat

Written by Sourav Majumdar | Updated: Feb 27 2002, 05:30am hrs
Whenever I used to meet former Securities and Exchange Board of India chairman Devendra Raj Mehta in his first floor Mittal Court office in Nariman Point, I got an uncomfortable feeling seeing him move around in his room. A very tall man, the six-foot-something Mr Mehta gave the impression that his head would hit the ceiling any time. In fact, the two of us often joked about the low ceiling in his room.The new Sebi chairman Gyanendra Nath Bajpai is a man of average height, and has no such problem fitting into the chairmans room. But perhaps the fact that Mr Bajpai does fit in easily into the Sebi chairmans chamber is more than mere metaphor.

Mr Bajpai is a grassroots insurance industry person, and brings with him decades of experience of directly being involved in hawking insurance products from Indias largest insurance corporation. To that extent, the new Sebi chairman is expected to know the pulse of those who buy his products, and what they expect from an insurer. As LIC chairman for the past one and a half years, Mr Bajpai has also been directly associated with spearheading LICs move into a different era altogether, one where its stranglehold on life insurance no longer exists, and new private sector players are offering sophisticated products designed to cater to a wide variety of needs. Mr Bajpai has, however, not allowed competition to get the better of LIC, taking the corporation instead to new levels of technology and customer focus.

If his first few statements as Sebi chairman are anything to go by, Mr Bajpai can be expected to carry on this way even at Sebi. With a slight difference. While his focus was the customer at LIC, at Sebi it will be the investor. In a sense, the objective is similar get greater public participation. Mr Bajpai has already articulated his intentions of doing so, and even said that the common investors faith in the capital market would need to be restored.

By making this one statement, he has put the spotlight firmly on the small investor who seems to have vanished from the stock markets these days. No longer does one see crowds milling outside the stock exchange building, nor is there the euphoria that was the trademark of the markets in the early nineties, albeit often thanks to not-so-noble driving forces. But whatever be the case, Sebis priority has to be to engage the small investors attention and convince him that the market is no longer a den of punters and moneybags who routinely ramp up or bring it down at will.

In a detailed interview to this newspaper a month before he retired, Mr Mehta made a candid admission: he had failed to educate the public and the media about Sebis role as a markets regulator. Sebi is not a guarantee corporation, he had declared, adding that the regulator was not expected to make good the losses investors suffered in the equity markets. Equity, he meant, was a matter of risk anyway, and Sebis job essentially was to ensure that disclosures were adequate and investors took informed decisions before investing.

Mr Mehta had, several times in the past, insisted that the Indian markets were a safe place to invest in and pointed out that not once in the seven years that he held office were the markets closed and trading stopped. Commendable indeed. But what needs also to be realised is that despite Mr Mehtas assurances, the small investor is still not convinced he should return to the bourses.

Why And this why is what Mr Bajpai needs to be concerned about. It is primarily because, despite Sebis numerous moves at beefing up market infrastructure, modernising stock trading with the use of technology, and making transactions cheaper and more efficient through dematerialisation, the Indian market is still imperfect and prone to manipulation at critical times. Yes, things are much better now after last years debacle in the markets, immediately after the budget, which led to the unearthing of Scam 2001 and a consequent cleansing of the bourses with some prodding from a hassled finance ministry.

But some vital things remain to be done to bring back the crowds to the main gates of the stock exchanges. Things like taking away the clout of a handful of operators, and even companies, over the stock markets. And the ability of these players to access information not generally available to the public, manipulate stock prices and make convenient getaways in the nick of time. New insider trading regulations have been notified by the regulator, but the crucial part is to activate these new laws, catch offenders, and bring them to book by way of exemplary punishment.

Mr Bajpai must also ensure that he gets more powers for Sebi, so that corporates cannot gift away small amounts of money as fines and continue to play havoc with the sanctity of Sebi regulations. He must lobby hard with the government to ensure that other powers apart, fines by Sebi hurt offenders so badly that they never repeat their offences again.

A regulator needs to be feared by wrongdoers, not the general public. Unfortunately, by being perceived as a reluctant regulator, Sebi is, these days, more feared by the small investor who is sure little action will follow market offences and, therefore, chooses to stay away. It is up to Mr Bajpai to break Sebi free of this image.