Uttar Pradesh Gamble
Political circles close to the ruling BJP in New Delhi are agog with theories of sabotage after the party declared Parmeshwar Lal Saini as its candidate from the Sambal Lok Sabha seat in Uttar Pradesh. In 2019, Saini lost elections from the same Sambal Lok Sabha Seat on a BJP ticket and also could not win UP Vidhan Sabha (State elections) from the Bilari seat on a BJP ticket even in the midst of a Modi wave. Recently, Hindi language newspaper Amar Ujala carried a story of how Saini's son had filed a case against a few circulating alleged obscene videos of his father. Then, there are other negative videos of Saini floating on social media platforms. Given the circumstances, there is a view among BJP's party workers that this time too Saini's chances do not seem too bright. Yet, a ticket to him by the top brass has spun a theory that there were conspiracies within the party to restrict the seat tally of BJP in UP, in a way that tremors are felt in New Delhi. UP with 80 seats is the most crucial state of the BJP to realize its dream of 350 to 400 seats.
Regulatory Arbitrage
The recent case involving Hinduja Group's bid to takeover Reliance Capital has hit a wall with the Insurance Regulatory and Development Authority of India (IRDA). The insurance regulator wants to know the hidden ultimate beneficiaries of the Hinduja Group, who intend to gobble up the general and life insurance insurance business of Reliance Capital. Hinduja group's Rs 9661 crore bid is via a Mauritius-based entity IndusInd International Holdings that has 600 shareholders, who are unknown to the Indian authorities. Also, IRDA has no clue of any businesses of Asia Enterprises LLP, which is part of the acquirer and the regulator says that the structure is vague and not even final as per the deal documents submitted by the acquirer and subject to change. But even as there is a cloud over the key aspects of the deal as per IRDA, stock market regulator SEBI was quick in giving its approval to the Hinduja Group to take over Reliance Capital's Wealth Management Business. Clearly, there exists some regulatory arbitrage when it comes to large takeover deals.
Hot Money, New Avatar
If the recent controversies involving Hari Tibrewal is anything to go by, then it comes out clearly that Participatory Notes, the hot money instruments in India, have been replaced by structured companies registered in Dubai, Mauritius and other tax havens. Several raids by the Enforcement Directorate (ED) has revealed that Tibrewal channeled much of the proceeds he and his accomplices generated through the cricket betting App Mahadev, into India's stock markets. Unlike PNotes, which were once the instruments of choice for politicians, hawala operators and rouge elements to trade in Indian markets, Tibrewal's modus operandi shows that they have been replaced by structured vehicles i.e. entities in Dubai and other offshore destinations. Tibrewal's holdings in nearly two dozen companies show he channelled hawala or illegal betting money into the stock markets via holding companies and manipulated the stock prices of several small and mid-cap companies. A few weeks ago, SEBI chief Madhabi Puri Buch had said that the regulator was investigating rampant manipulation in small and mid-cap stocks but nothing has come out yet.
BSE's share price frenzy
The share price of BSE has been riding the wave of revival in derivatives trading. The exchange now commands a market cap of more than Rs 38,000 crores. On the NSE, the price-to-earnings ratio of BSE Ltd is shown as 54.96 but the adjusted PE is 113. Data shows that the majority of the volume churn on the exchange happens on the day of derivative expiry when the spreads are too thin and trading frantically by a few brokers. Most recent weekly trade data between April 8 to April 12 shows that 92 per cent of Sensex index options volume during the entire week was on the day of expiry. Similarly, 88 per cent of BSE Bankex index options volume happened on the expiry day. Comparatively, only 27 per cent of the index options volumes for Nifty during the week and 34 per cent of the total index options volumes for Nifty Bank index happened on the expiry day while the rest were spread across the week. Recently, NSE has also cut down on its transaction charges and has a huge scope for further reduction. Also, the bottom line of the exchange that has more derivative volumes will be affected severely since they have to pay huge sums to SEBI as transaction fees. The NSE last year paid several hundreds of crores based on the notional turnover of options. BSE has a long way to go before derivatives speculation on its platform transforms into any meaningful earnings.
BW Reporters
The writer is author of the book: The Market Mafia - Chronicle of India’s High-Tech Stock Market Scandal & The Cabal That Went Scot-Free.
Palak has been a journalist in Mumbai for nearly two decades now. He has worked for most premier pink papers including The Economic Times, Business Standard and The Financial Express and The Hindu Business Line. He was drawn to crime reporting at the age of 19 but a few years in the field told him that the fabric of crime had changed and the organised gangs, as Mumbai had witnessed during the eighties, no longer existed. It was business and markets that dominated the scenario. His passion to unravel the intricacies of the ‘white money’ economy led Palak to the world of finance and regulations.
