When BSE Sensex soared past the psychological benchmark of 7,000 points last week, it was to the cheering drumbeat of the media. The celebratory coverage just stopped short of actually popping the champagne.
There is no Harshad Mehta or Ketan Parekh leading this bull charge, we are told. But has anyone paused to analyse the role of the media? Barring a handful of exceptions, the media — especially television networks — seem to believe that any market news worth covering, whether it is boom, doom or gloom, has got to be right over the top. And this sends wrong signals in all three situations.
The rush for meaningless sound bytes, colour stories and so-called sidelights even on individual scrip movements, usually destroys any chances of sober, meaningful reportage.
For instance, last week’s double celebration — the Ambani settlement and the Sensex scaling 7,000 — saw a reporter being dispatched to Dalal Street to get a fix on the mood there. After all, Kokilaben had resolved one of the biggest roadblocks to economic development by dragging apart her squabbling offsprings.
We read about how the sandwich and idli-wallahs around Dalal Street were in for bullish times as investors and brokers ate their way into a frenzy. We also read about ‘‘serpentine queues of investors at local phone booths’’ as investors hurried to place their orders.
Why does this picture seem all wrong? Because all big retail brokers with investors milling around their offices are no longer in Dalal Street. In fact, it is a decade since we switched to electronic trading and at least five years since the Street has lost much of its relevance.
Also, at a time when painters, plumbers, carpenters and vegetable vendors all sport mobile phones, it is bizarre to think that investors are still queuing outside ubiquitous PCOs to place their buy-sell orders.
If this is the class of investors entering the market at 7,000 or after the Ambani settlement, then it is clearly the time to exit. It’s like Joseph Kennedy (father of President JFK and once the SEC Chairman) said in 1929, ‘‘When the shoeshine boy starts giving you tips, it’s time to be out of the market.’’ He had cleaned out his portfolio and shorted the market before the great crash, making himself a lot of money.
The hype surrounding the Ambani fight and its settlement has been so exaggerated (why else would the media ask the Prime Minister for his reaction to the settlement?) that we have almost led the public to believe that the economy would be crippled if the dispute were not settled. Did anyone bother to mention that public holding in the flagship Reliance Industries is only 12 per cent and Foreign Institutional Investors (FIIs), including those with dubious beneficial ownership, do not hold more than 21 per cent in the company as a group? FII holding in Reliance Energy is even lower at 17 per cent while its public holding is a pathetic 6 per cent and mutual funds held just 0.58 per cent as on March 31, 2005.
Compare that with the FII holding in HDFC Bank (31 per cent), HDFC (63.95 pr cent) or Infosys (42.87 per cent). The public shareholding in all these companies is also significantly higher than in the Reliance companies. One could argue that Reliance’s asset size warrants this excessive focus, but if that were the criteria, then listed public sector giants such as State Bank of India and the oil companies ought to be on the same platform.
If euphoric 24X7 coverage by business channels is one side of the coin, then the refusal to probe negative news is the other.
The media never tires of describing this bull run as ‘‘broad-based’’. This really means that shady penny stocks and dubious mid-cap companies have also seen their share prices shoot up in tandem with the blue chips and the better companies in each category.
But although readers write in everyday with specific and detailed information on the price manipulation in smaller companies or the fraudulent ‘‘news’’ and advertisements that they plant, very few reporters are allowed to follow it up.
A decade ago, this used to be the job of junior reporters trying to find their feet in the profession. Today, all of them are deputed to find new angles or do soft, peripheral reports on the one big story that is being puffed up by television and the leading dailies. This usually means a series of meaningless quotes from people out for their two seconds in the spotlight.
Market veterans who know how easily share prices can be manipulated are cynical, but silent about the role of the media. Why should they speak out? They can instead profit from it.
The good news is that the situation is no different elsewhere. For instance, after the daily hype about the importance of China and the extent of foreign investment that is being pumped into that country, here is what The New York Times reported last week. David Barboza from the paper says the Chinese government is putting together a huge bailout fund of $15 billion to invest in ‘‘mainland stocks’’ to ‘‘prop up share prices and try to restore confidence in a market that has fallen to its lowest level in about eight years.’’
If, on the back of mindless hype, the Indian market eventually collapses (after all oil prices hit $60 on Thursday night), we can be sure that there will be a high decibel campaign to create a Bailout Fund that can only benefit foreigners and big speculators.
Already, some television channels are carrying the pleas from investment gurus such as Jim Rogers (currently a big commodity bull) to let in foreign investors and speculators into the Commodity Markets.
If that happens, then rampaging commodity speculation, coupled with weak regulation (believe it or not, the Agriculture and Consumer Affairs Ministries are in charge of commodity trading), and a slow justice system will push up the prices of essential commodities so high that it can only lead to a bloodbath.