SECOND GUESSING,SCARE MONGERING AND FINANCIAL OBFUSCATION

Not a day passes by without the passive, innocent investor/s getting bombarded by high decibel firework display by the audio visual media by prophesies of impending unwinding,profit booking,short selling, desertion by FII's ,re- rating by the Moody's etc. Consequently,the poor investor finds himself in a state of shock and awe. The audio visual media which specialises in reporting the happenings in the financial market, with the active assistance of various financial intermediaries, interlocutors,fund houses, rating agencies, investment gurus - homegrown or foreign,smooth talking anchors ,are the focus of this piece.
The task of India's one and only central banking authority viz. Reserve Bank of India(RBI); is onerous and thankless to say the least. However, the job mandated to be carried by the regulator (RBI)has to be carried out with utmost diligence and care besides factoring in the role of currency speculators who come in the garb of investors and are,therefore, perpetually on a sharp lookout for an arbitrage opportunity ,to make a quick pile for themselves.
The work of arbitrageurs has been made easy because the central banks around the world ,do not,as a rule, react to each and every financial/currency development in the market. Nor does the RBI step out and issue a press release to stop or quell the process of second guessing that goes on merrily and rampantly in the A V media. Every speaker in the audio visual media wants to out-do the previous speaker to create the shock and awe by prophesising impending fall in the sensex to such and such level besides indulging in second guessing and obfuscating the real issue at hand.The smooth talking intermediaries are for ever present in the talk show and are for ever willing to give their side of the view without ever taking any responsibility or accountability for the views they so ardently articulate. The same- set-of speakers even go to the extent of advising at what level and at what price the investor should enter the market and what should be the stop loss level for a particular security- both in a rising market and falling market! This leaves the poor,guileless, and innocent investor thoroughly confused. And that situation gets confounded, when the investment guru based in Singapore is roped in. That investment guru prides himself as being known as prophet of Gloom and Doom.Is there felt need for prophets?
This unhealthy development,if it had ended there, would be understandable in a talk show. The fact that chairman and managing directors of banks ,both private and public,feel compelled and get embroiled in the game of second guessing the possible moves of the central bank i.e. the extent of increase in Repo,Reverse Repo,CRR etc., ,should be curbed,with a heavy hand.
Another,distasteful participation by the banks is second guessing the level of weekly inflation rate and the audio visual media name the banks who have participated in the build-up of consensus inflation rate Are the banks mandated to lend their weight in building up inflation expectation or as an agent of change,development and growth?
All banks have their own risk management systems,in place. The system is required to be alive to all such emerging and evolving situations. However, in the unlikely event of the system not being in place and ticking, the absence of such a system calls for regulatory upbraiding and a directive to that effect. Nothing more nothing less will do to remedy such a situation. And, therefore, the need for chairman and managing directors to add or lend their weight in second guessing the RBI moves in audio visual media, in either direction,or allowing their banks to participate in building consensus level of weekly inflation level, is both needless and avoidable,to say the least. Reprehensible, if it continues despite this amplification,because, they will be a hindrance to / scuttling price discovery mechanism. Thus,effectively, undercutting at the very root of the existence of the Stock Exchanges in the country.
Further, it calls for strengthening the inter-regulatory mechanism for exchange of information and SEBI being sensitised to deleterious role being played by the non-responsible and unaccountable but systemically important financial intermediaries, since it can lead to systemic collapse with far reaching reverberations and consequences.
SEBI should also look into uniformly opaque and non transparent disclosures made by the financial intermediaries is nothing but mockery. SEBI should study the system of disclosure in USA etc and issue directions besides advising the audio visual media what is acceptable and what is to be eschewed at all costs. The audio visual media can at best be disseminator of market position and not market maker. It cannot usurp the role of the Exchanges, which are meant to facilitate price discovery .