Parliamentary panel on the trail of market volatility

In an aggressive bid to identify the “beneficiaries” of the wide fluctuations in scrip prices, the Parliamentary Standing Committee on Finance on Tuesday launched a concerted investigation into the recent stock market volatility. The Committee — it suspects the possibility of a speculators’ cartel at work — headed by BJP MP Ananth Kumar, will submit its report to Parliament in three months.

Members have also sought information from Sebi chairman M Damodaran, RBI governor YV Reddy and others on the guidelines for fixation of price for initial public offers (IPOs). Pessimism in the markets has meant that two high-profile IPOs, that of Emaar MGF and Wockhardt Hospitals, were withdrawn after below expectation performance. The more significant victim of the market sentiment and its rejection of higher pricing, not in consonance with fundamentals, though, was Reliance Power. Its IPO closed well below its issue price on its debut on Monday. As part of its investigations, members will travel to various cities and towns to elicit investors views.

The panel is to meet again on February 18, when the finance ministry is expected to make a presentation.

The Sebi chairman told the Committee, sources said, that since the Indian stock market is integrated with the global markets, it cannot remain immune to the global volatility. Mr Damodaran also said the US subprime mortgage crisis has affected the Indian stock markets and the liquidity crunch aggravated the situation on January 22. Members called for immediate steps to stop any cartelisation and high speculation in the market, apart from compulsory grading of public offers.

Sources said information was also sought on both these sensitive issues from NSE MD Ravi Narayanan and deputy MD Chitra Ramkrishna. They, along with Mr Damodaran and Mr Reddy, were queried on steps that NSE, Sebi and other authorities have taken to control the prolonged volatility in the market as well as the criteria for price fixation of IPOs.

At the meeting, the Committee members also spoke with brokers’ representatives, including Bina Mehta, and small investors’ representatives led by Investors Grievances Forum president and BJP leader Kirit Somaiya. UTI MF chairman UK Sinha and Mr Somaiya also made presentations at the meeting.

Members also sought the operationalisation of Investors Protection Fund under the aegis of Sebi at the earliest. This had been suggested by the Joint Parliamentary Committee, which probed the Ketan Parekh stock scam. Given the extent of the losses incurred by investors, members wanted Sebi and the government to launch an education campaign for investors to caution them against the markets’ volatile nature.