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Journalism of Courage
Last week the government decided to suspend futures trading in urad and tur dal, bowing to politicians8217; perception about excessive speculation in food grains. It must now follow up that action by paying close attention to the spot markets. India has 23 regional exchanges that trade in a variety of commodities and all are jostling for permission to expand their list of traded items. Trading on many of these bourses is directly linked to international prices, which are easily available almost on a real time basis today. In recent months, the commodity regulator has acted to check speculation on automated, multi-commodity bourses. For instance, it barred evening trades in soya, where volumes used to jump when the American markets opened for trade. However, spot markets, which operate with antiquated trading systems, continue to escape scrutiny. For instance, in soya itself, an active kerb market springs to life after 5 pm after international exchanges open. Since automation is primitive, kerb deal are easily regularised when official exchange opens the next morning. In fact, spot markets in commodities are in the same position that Bombay Stock Exchange was in the 1980s. If the government is serious about checking inflation due to rising food prices, it must focus on the urgent automation and regulation of commodity spot markets. Insiders also say that bucket shops or dabba trades are also so rampant here that barely one-fifth of the trades are reported on official bourses.
RTI encroachments
Warning signs
The best borrower pays the least interest; it is an axiom that bank depositors must not forget when they are tempted by high interest rates offered by cooperative banks. This is especially important because the banking regulator usually acts when it is already too late. The Grahak Suraksha Academy of has written to Reserve Bank of India8217;s Gujarat office drawing attention to some alleged arm-twisting by Cooperative Bank of Rajkot Ltd. The bank asks depositors to invest 50 per cent of their deposit in the share capital of the bank by promising a 15 per cent dividend. Allegedly, the balance is to be deposited in a special five-year deposit bearing 7 per cent interest. Depositors are told that this actually works out to an 11 per cent return to the depositor, as against 8-9 per cent being paid by other banks. But then, half the deposit is in risky, unlisted equity and the other half is tied up for a longer term at a lower interest rate. Interestingly, the bank8217;s website boasts of a 8220;zero NPA8221; status, but the balance sheet posted on the website is for the year ended March 2005.
Flawless rise
Flawless Diamond India Ltd, a little known company that has been in existence for over a decade, is suddenly soaring to unprecedented highs. The scrip spurted from just around Rs 13.45 in June last year and Rs 57 a month ago to a high of Rs 112 last Friday. The sharp rise is accompanied by a series of corporate announcements including the opening of some retail outfits and new orders that hardly seem to merit such excitement. Can the frequency of announcements alone drive up the share price? Clearly, this is another one that has flown under the radar of the much-touted Integrated Market Surveillance System of the regulator. Meanwhile, sources say that the lock-in on preferential allotments to the promoter group is set to end very soon and if anything, this would increase liquidity and should depress the price.
