Friday, December 16, 2005

SEBI dredges up another scam

The fickleness of the capital markets again came to light today with the SEBI unearthing a demat racket involving entities that opened thousands of demat accounts and applied for the Yes Bank public issue through multiple applications to ensure higher allotments in the retail portion of the offering. One of the benami agents, Roopalben Panchal applied for a single application in her name and got none. Nevertheless she turned richer by 9.47 lakh shares that were allotted to her through the 6,315 demat accounts she had opened with depository participant Karvy. All demat accounts were with Karvy, and all bank accounts with Bharat Overseas Bank. These two entities have also been sent notices by Sebi to examine their application norms.

For someone who has burned his hands in the stock markets, such news only re-establishes the volatility of this kind of investment. What kind of risk appetite does the government expect investors to have? Parallel economies run on the markets, most notably, research analysts who dispel advice on the best buys. Business news channels are lauded for changing the rules of journalism by bringing slickness to an erstwhile dour medium. Who will however take responsibility in the event of a meltdown for the humongous amount of stock advice doled out every day?

If you are in any way interested in equity, my advice is look long-term. If you park your funds in blue-chips like Infosys and TCS, there is little likelihood that you’ll incur losses on a 4-5 year outlook. You can also look at mutual funds that do the investing for you by tapping into sound research and financial tools. The bigwig here is “long-term”. If you are the kind of person who gets the jitters on every dip in the markets, stay away and spare yourself a lifetime of anxiety.

City Slickers hit the hay

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