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Bulls, Bears and other Beasts by Santosh Nair

Making It To The Big League

Due to Lala's unusually long winning streak, soon people in corporate circles began to hear his name. He got to meet some interesting market operators too among whom JC was the most notable. He had been in the market since the last 1980s and it was his bearish bets that had earned him the attention he relished. 


In 2008, SEBI had approved a facility called Direct Market Access (DMA) through which clients could access the stock exchanges' trading system through their brokers' infrastructure, without his manual intervention. This fuelled the growth of programmed/algorithmic trading. The exchanges feared that algorithms without adequate safeguards could wreak havoc in the market. NSE and BSE also introduced a new facility called "co-location". Through this, brokers could, for a fee, get to place their servers close to the exchanges' trading engine. This helped to enable the brokers to get faster access to the buy-sell quotes. By the time a trader would punch an order after checking the prices on his screen, the algorithm software would have already snatched the trade from him. SEBI also asked institutional players to start paying upfront margins on their cash market transactions.


There were two blockbuster public issues in 2010. One of them was SKS Microfinance (Now Bharat Financial Inclusion-lapped up by IndusInd Bank) which introduced a new concept in the stock market. People knew that MFIs (microfinance) loaned money to the financially weakest sections of our society, that is, the poorest of the poor - people who had no access to banks and other financial institutions. SKS was founded by Vikram Akula, an Indian American.


For the first time, investors were being served capitalism and altruism together on Dalal Street and everybody wanted a taste of it. The stock had a good run over a month after its listing but problems started arising when the CEO of the company resigned. A series of suicides by borrowers in Andhra Pradesh drove the government into issuing an order to curb the activities of the MFIs. SKS's growing presence had also threatened the livelihood of many politicians who had a vested interest in keeping the poor poor. Retail investors got a fair shot at making some decent returns through the Coal India IPO. The Sensex topped 21,000 after a gap of nearly thirty-four months. Market wisdom dictated that a blockbuster IPO usually signaled the peak of a bull run. This turned out to be true again as the market began to flag after the listing of Coal India shares.

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