To Avoid Market Manipulation

sachin divase · #1 6th June 2005, 05:40 PM

Nifty Weigtages:

ONGC--13.42
RIL----7.58
TCS---6.54
INFO--6.22
WIPRO--5.14
BHARTI--4.22
ITC---3.99
SBI---3.6
HLL---3.28
ICICI--2.99
-----------
-------57%

These 10 stocks contributes 57% to derive nifty.
By manipulating these 10 scripts only,manipulaters can manipulate market in any direction and can generate volatility.
Nifty or Sensex is Barometer of whole scripts(large cap,mid cap,small cap)
If market starts falling,all the scripts falls.(except few)

So manipulators can manipulate entire market buy just manipulating 10 scripts.

This is because these 10 scripts has got huge weightages due to their market capitalisation.
Remedies To Avoid Market Manipulation---
1)
At present weightages are given to 54 scripts (capital above 3000Cr)
to derive nifty.
As per my view, weightages given to these scripts should be equal.
It will come 1.85% per script.
To manipulate 54 scripts is not so easy.So volatality will reduce.We will get stable market.And small investors will be safe .
2)
Instead of this other solution.
Operators manipulate scripts by making huge market orders within few minutes.
So there should be limitation of quantity of market orders(say max 200 at a time) Due to this they should not be able to manipulate scripts within few minutes.So small traders will be saved from burning their fingures.

I am interested to listen views,opinions ,suggestions from
Respected Traderji and all forum members to avoid market manipulation.

trader9 · #2 6th June 2005, 05:59 PM

Quote:

Originally Posted by sachin divase

Nifty Weigtages:

ONGC--13.42
RIL----7.58
TCS---6.54
INFO--6.22
WIPRO--5.14
BHARTI--4.22
ITC---3.99
SBI---3.6
HLL---3.28
ICICI--2.99
-----------
-------57%

These 10 stocks contributes 57% to derive nifty.
By manipulating these 10 scripts only,manipulaters can manipulate market in any direction and can generate volatility.
Nifty or Sensex is Barometer of whole scripts(large cap,mid cap,small cap)
If market starts falling,all the scripts falls.(except few)

So manipulators can manipulate entire market buy just manipulating 10 scripts.

You are mistaken. These companies are the pillars of India's modern economy.
They represent diverse sectors such as
Banking (SBI, ICICI)
OIL (ONGC)
Information Tehnology (WIPRO, INFY, TCS)
PetroChemicals etc (RIL)
FMCG (HLL, ITC)
Telecommunications (BHARTI)

These sectors are the main drivers of the Indian economy. The weights given to these stocks are apt considering their importance.
There are other ways of preventing market manipulation, equalising weights in the Index irrespective of market capitalisation is not one of them.

About protecting small investors.
Their protection lies in their own hands. Majority of them invest in low quality scrips in a bullish market, instead of the blue chip companies.
Lack of basic research, desire to double, triple their investments in short time, investing on tips, etc. is the reason for their downfall.

Quote:

Operators manipulate scripts by making huge market orders within few minutes.
So there should be limitation of quantity of market orders(say max 200 at a time) Due to this they should not be able to manipulate scripts within few minutes.So small traders will be saved from burning their fingures.

Small investors should never trade the markets whether just after the markets open, or just before the market closes.

Regards!

sachin divase · #3 6th June 2005, 07:00 PM

Quote:

Originally Posted by trader9

You are mistaken. These companies are the pillars of India's modern economy.
They represent diverse sectors such as
Banking (SBI, ICICI)
OIL (ONGC)
Information Tehnology (WIPRO, INFY, TCS)
PetroChemicals etc (RIL)
FMCG (HLL, ITC)
Telecommunications (BHARTI)

These sectors are the main drivers of the Indian economy. The weights given to these stocks are apt considering their importance.
There are other ways of preventing market manipulation, equalising weights in the Index irrespective of market capitalisation is not one of them.

About protecting small investors.
Their protection lies in their own hands. Majority of them invest in low quality scrips in a bullish market, instead of the blue chip companies.
Lack of basic research, desire to double, triple their investments in short time, investing on tips, etc. is the reason for their downfall.

Small investors should never trade the markets whether just after the markets open, or just before the market closes.

Regards!

I am fully agree with you that they are pillar's of Indian economy.
But these pillar's are so vibrates due to manipulation ,vibrating total market capitalisation .And this manipulation is only due to heavy weights given to them.

Do you remember 14 may 2004 and 17 may 2004.
What is your opinion about these two days?
What happened to these pillars?
Wise investors also burnt their fingures due to fear.
Pillar's should be firm enough such that no one could (FII'S, operators)
oscillate them.

My Dear friend,
Can you suggest any other ways to avoid market manipulation?

trader9 · #4 6th June 2005, 09:42 PM

Quote:

Originally Posted by sachin divase

Do you remember 14 may 2004 and 17 may 2004.
What is your opinion about these two days?
What happened to these pillars?
Wise investors also burnt their fingures due to fear.
Pillar's should be firm enough such that no one could (FII'S, operators)
oscillate them.

What happened on May 17 2004 was dumping of stocks across sectors by certain brokerages/intermediaries on behalf of certain foreign investors/hedge funds.
The fall of May 17 of stock prices had no relation to the fundamental value of these companies.
Infact the post May 17 2004 was an oppurtunity for strong minded investors to accumulate the shares of blue chip companies at low prices.
Wise investors should be able to differentiate between value and price otherwise they are not wise enough to invest in the stock market.
The pillars still hold and they held during the May 17 2004 carnage as what was affected was price and not value.
They are pillars because of their strong fundamental business value, growth in topline and bottomline and efficiency in business practices. The price in the long term follows the value. This was reflected as the stock price of these blue chip companies rallied back to their pre May 17 level.

Regards!

sachin divase · #5 6th June 2005, 10:04 PM

Quote:

Originally Posted by trader9

What happened on May 17 2004 was dumping of stocks across sectors by certain brokerages/intermediaries on behalf of certain foreign investors/hedge funds.
The fall of May 17 of stock prices had no relation to the fundamental value of these companies.
Infact the post May 17 2004 was an oppurtunity for strong minded investors to accumulate the shares of blue chip companies at low prices.
Wise investors should be able to differentiate between value and price otherwise they are not wise enough to invest in the stock market.
The pillars still hold and they held during the May 17 2004 carnage as what was affected was price and not value.
They are pillars because of their strong fundamental business value, growth in topline and bottomline and efficiency in business practices. The price in the long term follows the value. This was reflected as the stock price of these blue chip companies rallied back to their pre May 17 level.

Regards!

According to me that was nothing but market manipulation.
And small investors never looks value, but the price at which he has bought
the share and in such crashes(manipulation) he sells his value picks to big hands.

trader9 · #6 7th June 2005, 11:44 AM

Quote:

Originally Posted by sachin divase

According to me that was nothing but market manipulation.
And small investors never looks value, but the price at which he has bought
the share and in such crashes(manipulation) he sells his value picks to big hands.

A small investor who never looks at value and sells his stock in panic is not an investor, not even a speculator but an ignorant buffoon. He deserves to get his fingers burnt. The market is not a gambling arena.

Preventing Market manipulation
SEBI's role
comprehensive check on registration of market intermediaries
regular inspection and audit of intermediaries
implementaion of Know Your Customer regulations
investigations

Stock Exchange roles
system of circuit breakers/filter mechanisms
suspension of trading
diverse margin requirements
disclosure of high networth clients to the exchanges by the intermediaries

Above are mentioned some of ways in which market manipulation can be prevented.
Besides one can not stop people, whoever they may be, to dump their holdings onto the market if they do so as per the rules.
An efficient market requires structural solutions to prevent market manipulation and not cosmetic changes such as those suggested by you (sachin divase)

How can one prevent dumping of stocks and consequent price fall by changing the index weightage. the Index can be protected but the price at which the so called small investors want to sell off their holdings is still low.

Regards!

pkjha30 · #7 8th June 2005, 08:41 PM

Hi
if you see bse or nse site you will find that there are many stocks which are appreciating as much as by 20% in a day but volumes are meagre and even small volumes drive prices high or low.

There are many scripts for which only buy order or sell order is available. Total maket capitalisation for such scripts are very low and credentials of the companies are doubtful.

Therefore NSE/BSE has not included many companies in the index which have market capitalisation below certain limit. This is just to protect the investors.To really manipulate the indices, operators have to be really big or they have to act in concert. That is what happened during last crashed. The value proposition for such companies didnot change during crashes. If you have reasearched enough such crashes could provide opportunities for long term investment.

Those who are seeing the jump in prices and purchase invariably loose money. Remember flow of money is always from the pocket of a fool to the pocket of a wise.

However if you want you could construct you own indices and include any number of scripts to reflect the market sentiments.

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