Volatile Markets

This refers to your edit on Volatile markets (Et, May 28). The stock market has been very volatile since 2008 for some reason or other and the investors particularly retail and small investors are the confused lot when to enter and exit the market.The global financial crisis emanated from US in 2008 has brought down the sensex from its peak and the present Euro zone crisis does not allow to give a lift to the sensex although the economy continues to perform well in all fronts except perhaps in containing the inflation.
Unfortunately our stock exchange operations are dictated by FIIs who move their funds globally for arbitrage operations and our players in the market have not developed any strategy to contain the FIIs dictats.The possible reason for such a state of affairs may be the large float of liquid shares with traders, brokers,mutual funds and institutions who invest in shares only from speculative angle and not necessarily as part of prudential management of their surplus funds. The holding of shares by retailers is insignificant and this is the major cause for unrestrained volatility in our stock exchanges. It is for authorities to initiate policy measures to strengthen the retail holding of shares at least at 25 percent if not fifty percent of the issued capital and encourage retention of shares by providing loyalty bonuses . Too much of speculation adds uncertainties and retailers suffer the most. STT can also be developed as a tool to prevent undue speculation.

Dr.T.V.Gopalakrishnan