Sucheta Dalal :Changing fortunes (30 March 2003)
Sucheta Dalal

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Changing fortunes (30 March 2003)  

Within three months of allowing retail trades in gilt-edged securities, the Indian capital market is ready to move further ahead and commence trading in two interest rate derivative products from April 21.

Debt markets players are gung-ho about the two products—a 91-day treasury bill future and a 10-year bond future—and say that it is the biggest development in debt market in over 10 years. These sources believe that if the RBI permits banks and institutions to trade freely in this market, then interest derivatives alone could log trades worth a few thousand crore rupees everyday.

There is also hope that the retail gilt market which is languishing since it was launched by the Finance Minister, will get a fillip if banks, mutual funds and other large traders decide to trade on stock exchanges instead of telephone market.

On the other hand

Ironically, the relentless march to offer a global menu of trading products is only increasing the distance between the efficient National Stock Exchange (NSE) and India’s 22 other bourses.

Last week the Securities and Exchange Board of India (Sebi) superseded the Ahmedabad Stock Exchange. Sources say that the Pune and Calcutta Stock Exchange (CSE) may be the next in line for similar regulatory action.

A Sebi investigation report has in fact recommended the closure of the Kolkata bourse because of its persistent regulatory failures leading up to the debacle of 2000-01. Well over half of the other Indian bourses have had no trades at all for over a year and some are seeking to convert themselves into commodity trading exchanges in order to stay alive.

Then there is the Bombay Stock Exchange (BSE), which was once India’s pride but is now losing market share everyday. The BSE was forced to remove 12 top stocks from its Futures & Options (F&O) list last week because there wasn’t enough liquidity in these scrips on the cash market.

The scrips that it has had to eliminate include blue chips such as HDFC, BHEL, Grasim, BSES, Tata Power, Gujarat Ambuja, Hindalco, VSNL, Mahindra & Mahindra, Tata Tea, Sterlite and Shipping Corporation of India.

This only indicates a growing gap between the BSE and NSE in all its trading segments. It is also a signal that SEBI should take a close look at the future structure of India’s capital market and encourage changes in the right direction. But before it does that, Sebi needs to find at least three new Executive Directors is a hurry.

Early beginning

A Reuters report says that New Jersey teenager Jonathan Lebed, who became the first American minor to be charged with securities fraud two and a half years ago, is now 18 and all set to become a politician.

The Cedar Grove based Lebed is running for one of two open seats to his town council after graduating from high school last June. At 15, Lebed had agreed to pay $285,000 to the US Securities and Exchange Commission (SEC) in a settlement for securities fraud charge that he had used multiple fictitious names to make fake recommendations on Yahoo! sites and ramp up the shares of AOL and E*Trade to make a lot of money. More importantly, even after the SEC settlement, the kid retained a cool half a million dollars. Obviously, he has just what it takes to be a terrific politician.

Only CellOne

Prithpal Singh, the go-getting chairman of Bharat Sanchar Nigam Ltd (BSNL) recently told a business daily, ‘‘I’m going where no man has gone before to offer cellular services’’. He cited the example of Kerala’s famous temple town Sabarimala as an example where BSNL’s CellOne is the only cellular service provider.

But it is Munnar, a picturesque hill station that borders Kerala and Tamil Nadu that is probably a better example of BSNL’s dynamism. Munnar is Tata Tea country with its rolling tea plantations stretching as far as the eye can see.

It also has a little bit of the RPG group in the form of Harrison Malayalam’s tea estates. But the Tatas have no IDEA of going to Munnar, nor has RPG Cellular seen fit to climb the hills.

Even the new pact between the four cellular operators — BPL, Escotel, RPG and Spice Telecom — will not make a difference unless they add new cell sites.

But a CellOne billboard on the mountainside announces BSNL’s presence. It signals that unless the private operators get their act together and increase geographical coverage, it’s a matter of time before users switch loyalty to a service that is available everywhere.

-- Sucheta Dalal