Originally posted in The Financial Express on 8 May 2024
Leaking of inside information has been adversely impacting the country’s stock market as a whole, said eminent economist Dr Debapriya Bhattacharya.
He said this during a speech at a programme organised by Economic Reporters’ Forum (ERF) at its office in the capital.
The economist said a group of people were taking advantage of inside information.
For example, he said, to explain inside information, the government decided to take up a big project of a bridge or an airport. No one is supposed to leak this information, but some people do this and that benefits those, who based on the information, purchase lands in the project areas prior to the beginning of the development works.
Mr. Bhattacharya said people could use raw data, not yet made public, for the sake of own profits. Such practices have damaged the capital market.
Share prices exhibited ups and downs based on inside information, he added.
Mr. Bhattacharya was also critical of investor behiviour that leads to rally of non-performing companies on the bourses. He said there was a lack of accuracy in disseminated information for such a situation to happen.
Deception can be avoided if the risks of inaccurate information are discussed and minimized.
Companies often say there was no undisclosed price sensitive information (PSI) behind abnormal price hike of stocks and large trade volumes.
After the stocks reach a certain level, those, who have been behind the price hikes, offload their holdings to general investors.
After the programme, the FE correspondent talked to Mr Bhattacharya on the capital market.
He said the capital market would not perform well as long as the banking sector performs poorly and the system to channel funds is not well designed.
The economist laid importance on investing in mutual funds (MFs) by general investors.
But investors have lost confidence in the MFs because of their poor performance.
In this regard, Mr. Bhattacharya gave references to fund embezzlement by MF managers and said the regulator must take stringent actions against those responsible so investors can regain faith in the sector.