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Monday, October 10, 2011

Basics of Share market - 2G scam - Marans raided by CBI


We do read newspapers, hear TV channels and talk to people – still to some of us like Sensex, Nifty,  Bull, Bear, Rally, crash, correction, EPS, P/E ratio et al could be bullying and terms which pertain to only those who have loads of money, do not know what to do and so invest them in share market !!  To some Sensex, may not be known to be an index representing the direction of 30 odd company’s shares – at a time, when the life of some depends on the movement of it….

For a simple person:  A Company divides its capital into units of equal denomination, which are known as shares.  As you can understand, not all the capital (the money required for starting and running the Company) is that of the Promoter or the Owner.  The shares are offered for sale to raise capital from the general public.  The person who buys is the share holder and share is thus an unit of the capital.  The denominated value of share is its face value and you can buy multiple units of the face value.  The purchases made when such offer is made is primary purchase.  The shares can also be bought anytime thereafter – that is done at the share market and is known as secondary purchases.  This is done not at face value but at the prevalent market rate.  Now a days, with the demat (shares in e forms) – there is no market lots, and one can buy as small a quantity as possible. 

The values of the shares fluctuate sometimes in volatile manner and investors burn midnight oil to analyse and assess what to purchase, when to, whether to hold on or if decided to sell – when, how much and what rate – all in a princely battle to gain some money out of the share market !

The purchases and sales of physical shares were done once in physical share markets where share brokers used their vocal chords to clinch deals – gone are those days.. now a days sitting in one’s office one can buy and sell them with a click of a mouse or do off line trading at a phone call….  Those involved in share markets are perceived to possess extraordinary financial acumen and keep spending lot of their time on reading about companies, its performances, the trend, various other nuances, place in graphs to understand better and then take financial decisions….. 

It does not require any intelligence to understand that when one buys something at X and sells them at X+ %, he gains a profit but to do this, one has to watch the market continuously  and decide aptly timing and executing one’s decision to nicety. 

Well, most of the salary earners who indulge in share market, allot a portion of their savings or investible income on shares and play in the share market.  Some do this with little thousands (when you pay peanuts you get monkeys !!) – with small sums, you can buy shares of small companies or shares in small quantities as low as 5 or 10 or even lesser….  – and those shares rising and paying back handsomely is a wish !

-         frequently, one would hear of scams – scams in financial markets, scams in sectors and thus affecting shares of all related and unrelated shares, scams in places and more – all could deplete your portfolio.  One reads / analyses about the value of shares, its price earning ratio, the probability of declaring bonus shares, dividends and more and then decides on investing or trading on such shares…

when a big % of the trading community but virtually contributing a small % in the market (again 80:20 principle) – gets affected by the market volatility – there are news that there are scams when Companies are forced to buy shares of another company at a very high rate (than the market rate) for obvious other reasons; also Company’s forced to sell shares to some (at lower than market rates) -  in the process a lot small fish could get crushed in the bigger whale deals….

The name 2G is in the lips of the Nations thanks to newschannels and Subramanya Swami who threatens to  bring more and more high placed politicians tainted in the scam.  The 2G spectrum involved  officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones.  Going by one estimate (that of CAG) the  shortfall between the money collected and the money which the law mandated to be collected is 1,76,379 crore.  The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia.

It has claimed some heads already and two top politicians of DMK A Raja and Kanimozhi are in prison for some months now.    Today, news channels are agog with news of CBI raids in Chennai, Hyderabad and Delhi in the houses of former Telecom Minister Dayanidhi Maran in connection with the Aircel-Maxis deal.  There are reports that  CBI team reached Maran’s residence around 7.30 am and that an  FIR was filed against Maran and his brother Kalanidhi, Ralph Marshall who is the CEO of Astra TV that invested in Sun TV and T Anandakrishnan on Sunday. The FIR has been registered under the Prevention of Corruption Act. The CBI claims Rs 600 cr bribe was given to the Maran brothers. A case has been filed against them. The CBI said Maran delayed licenses to Aircel.

In the land of politicians, the action comes after long delay and whether it would yield any positive results can be speculated but the fact that even highly placed Ministers are not completely out of the net and can be interrogated, questioned, premises raided and even apprehended only shows that the system is strong enough though abused by those in power

Regards – S. Sampathkumar.

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