Games promoters play

Rex Mathew
28 March 2005

Massive media campaigns by small companies about their financial performance should be viewed with suspicion. They are designed to mislead you.

Before the '90s even in the '90s when the Indian stock market came into its own, promoters who manipulated share prices were considered market- friendly and even admired. Stocks of such companies were the favourites of investors and traders alike. Many large and respected industrial houses were masters of this game. The few corporate groups who stayed out were considered conservative. With hardly any restrictions on insider trading, such promoters had a free run till SEBI came around and made life tougher for them by controlling insider trading and imposing better disclosure standards.

The ever increasing influence of foreign investors and the emergence of private domestic mutual funds, who do not view market manipulation very kindly, have forced the managements of many frontline companies to change their functioning. But companies and managements at the bottom of the ladder remain more or less the same. Despite all the regulations introduced by SEBI and better monitoring by the exchanges, they continue to indulge in questionable practices and profit from them. Many of them have devised ingenious and clever methods to remain on the right side of the law even when their intentions are questionable.

Those who watch business television channels regularly, would have noticed a sudden increase in advertisements by obscure companies ever since the market started moving up. These advertisements are not about the products or services marketed by these companies but about the companies themselves.

There is nothing wrong in corporate advertisements as long as they stick to general information about companies. But when they start talking only about financial performance and orders in hand, doubts arise about the purpose of such advertisements and who the target audiences are. The fact that such advertisements are absent when the market is weak reinforces doubts about them.