There's a basic belief amongst most buyers that markets are managed by operators and it's no place for small investors. It is believed that the operators enriched themselves at the cost of small traders. Two scams of 1992 and 2002 had sure operators on the center of the storm. There were other star gamers out there also in the past that had a big function to play in the market actions. Allow us to look at the validity of the assertion that Inventory Markets are run by operators.
An operator is an individual who is meant to drive the market worth of a particular share that's he decides what should be the pricing of the share and whether it ought to go up or down. It's also believed that operators in affiliation with the management of the company first purchase certain stocks available in the market and subsequently by means of rumors and such different communication mechanism create a mass interest within the share. Subsequently as soon as most of the people starts believing within the company's prosperity the operators sells the shares and makes good-looking income. Some operators also use circuit mechanism of stock exchanges to hike the price. The circuit mechanism allows the operator to place an order at a price which is 3 to eight% above the earlier days closing. Once the share hits upper circuit there are only a few sellers out there since they imagine that if the share has hit upper circuit it's likely to go up additional. That is the modus operandi of an operator. For an operator to achieve success some components are very
important. Resembling connivance with the management, low capital base of the company so that manipulation will be finished with little or no capital and a mass following.
Is manipulation attainable in excessive quantity shares? Allow us to now take a look at the trading statistics reported by inventory exchanges (information of a selected date). Top 30 scripts i.e. 10 in each group, account for forty one% of turnover in NSE and 37% of the turnover in BSE. Both the Exchanges put collectively this interprets in to a worth of about 4100 crores every day. As per the market share reported of brokers by NSE (NSE Bulletin) high 10 trading members account for just 24% of the market share i.e. on a median every dealer would have about 2.four% of the market across all firm shares traded by the company. Therefore, the dominance that a single dealer can have on the volumes out there is minimal in highly traded scrips.
Then we move to low worth excessive volume traded scrips. As per the information is provided by newspapers separately on Quotations web page, the mixture value of shares traded in this class on a selected date was studied. The turnover for BSE in such scrips was Rs.34,03,470 i.e. .01% of complete turnover and for NSE is Rs.20,28,050 i.e. zero.003% and when it comes to number of shares traded it's 1.5 % in case of BSE and in case of NSE 0.forty five%. This is one space where low funds will help to maneuver the prices and give a false sense of liquidity. Therefore buyers are suggested to refrain from investing in scrip just because it's low value; the advantage of the share should be looked into before making the investments.
The Inventory exchanges have a system of guiding the investors on stock choice by the use of classifying the companies into various teams. A group shares are extremely liquid and good performing corporations. B1 group are again good performing corporations with lesser liquidity then A group stocks. B2 are shares which have low capital bases and less liquid. Firms that do not adhere to Listing agreement are categorized as Z group. These firms do not attend to investor complaints and fail to file varied investor associated information with the inventory trade comparable to quarterly working, e book closure dates and so forth. Shares which have concentrated exercise and unusual price movements are categorized in T 2 T or commerce for commerce settlement, ie each sale and buy must result in delivery and positions can't be squared off during the day. This classification needs to be kept in thoughts whereas choosing an organization for investment. Stock exchanges also verify the information ite