27-Jul-2010

No Such Thing As Free Advice?

I posted How Rigged Is The Indian Stock Market? back in June.  Relatedly, though not on insider trading/front-running as that post was, is this bit of advice from the Ministry of Corporate Affairs: 'Beware of investment advice on TV'.  An excerpt:

"Beware of the media, especially the stock-specific advice on electronic media. Too many saints in the capital market offering free advice!.. In reality, many of these advisors have vested interests," the guide said....

Do not blindly take decisions based on accounts just because these are audited, the guide cautions, "high incidence of fraudulent accounts and mis-advertising of financial results. Satyam case is a wake-up call."

Not giving too much of credence to 'free' advice is ok, even though that is what our 'business' channels are filled with the entire day.  But we can't even trust the company accounts?!  On what basis does one actually make investment decisions?  Is this one more way to drive money to mutual funds etc?

On the same day comes this from Business Line: Media toys around with markets.
“They” provide us a running commentary from morning till late evening. “The morning session is crucial,” they say. And if you thought that was a cricket commentator talking about the first hour of play, you are mistaken.

These are market commentators. “The middle session is crucial” and subsequently “the final hour of trade is crucial.” Repeated use of the word “crucial” is aimed at turning on the viewer and making him believe that something big is happening.

This live relay is further followed by expert analysis till late into the night. If you thought “they” were merely commentators, you are possibly wrong. “They” have a deeper and a far more complex agenda — of influencing the minds of the viewers.

Talking up share prices or talking them down is part of the strategy of these “anchor investors”. Thanks to the silence of the market regulator, SEBI, all these have now come to be characterised as acceptable.

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