When Mr Madhukar, one of the top three officials at the Securities and Exchange Board of India (Sebi) declared that the benchmark Sensex would cross 16,000 before the financial year was out, even market players were aghast. Is this just another example of the foot-in-mouth disease that afflicts many of our ministers, parliamentarians and senior bureaucrats? It would be dangerous to dismiss it as such, because it is symptomatic of a deeper malaise at the regulatory body.
After eight months in office, the very least that a senior regulator ought to have learnt is the sensitivity and responsibility of his role. He cannot wriggle out of the situation by claiming that his comments were taken out of context. A regulator is supposed to keep his eyes and ears open to market intelligence, in order to catch malpractices. At this point of time, even seasoned market players are worried at the relentless rally in prices and the apparent re-emergence of many earlier scamsters as big price manipulators in several dubious small and mid-cap companies. Even the finance minister said, just a couple of weeks ago, that he would be worried if the Sensex crossed 8,000 in the immediate future. Mr Madhukar is, clearly, not worried. Instead, he seems prepared to enjoy a ride along with the soaring Sensex.
Ironically, over the past couple of years, Sebi has been cracking down on government bureaucrats and heads of public sector undertakings (PSUs) to prevent unguarded or off-the-cuff comments from destabilising PSU stock prices. One instance that led to an investigation was when contrary statements by various finance ministry bureaucrats caused serious volatility in bank shares over the issue of return of capital to the government. Mr Madhukar was probably a PSU bank chairman then. In another case, Sebi had complained to the finance minister when the chairman of a fertiliser PSU seemed to be talking down the price of his company in order to discourage its disinvestment.
All capital market regulators impose strict restrictions on managements of listed companies to curb false claims and frivolous utterances aimed at boosting their stock prices. Clearly, there is no need for a rulebook to tell a senior regulator what kind of jokes and predictions are taboo for his job function. This sort of confusion over role and responsibility, coupled with a lack of accountability, will be a recurring theme so long as the government does not take senior appointments at the capital market watchdog with a lot more seriousness.