There's a basic perception among most investors that markets are controlled by operators and it is no place for small traders. It is believed that the operators enriched themselves at the price of small traders. Two scams of 1992 and 2002 had certain operators at the middle of the storm. There have been other star gamers out there also in the past that had a giant position to play out there actions. Allow us to examine the validity of the assertion that Inventory Markets are run by operators.
An operator is an individual who is meant to drive the market value of a specific share that is he decides what needs to be the pricing of the share and whether or not it should go up or down. It's also believed that operators in affiliation with the administration of the corporate first purchase certain stocks available in the market and subsequently via rumors and such different communication mechanism create a mass curiosity within the share. Subsequently once the general public starts believing in the firm's prosperity the operators sells the shares and makes good-looking earnings. Some operators additionally use circuit mechanism of stock exchanges to hike the value. The circuit mechanism permits the operator to place an order at a price which is 3 to 8% above the previous days closing. As soon as the share hits upper circuit there are only a few sellers available in the market since they believe that if the share has hit upper circuit it's more likely to go up further. That is the modus operandi of an operator. For an operator to be successful some components are very
essential. Resembling connivance with the management, low capital base of the corporate in order that manipulation may be accomplished with little or no capital and a mass following.
Is manipulation attainable in high quantity shares? Allow us to now take a look at the trading statistics reported by inventory exchanges (knowledge of a specific date). Top 30 scripts i.e. 10 in every group, account for 41% of turnover in NSE and 37% of the turnover in BSE. Both the Exchanges put together this translates in to a value of about 4100 crores each day. As per the market share reported of brokers by NSE (NSE Bulletin) prime 10 trading members account for just 24% of the market share i.e. on a mean each broker would have about 2.4% of the market across all company shares traded by the corporate. Therefore, the dominance that a single broker can have on the volumes available in the market is minimal in highly traded scrips.
Then we transfer to low value excessive quantity traded scrips. As per the information is offered by newspapers separately on Quotations web page, the mixture worth of shares traded in this class on a specific date was studied. The turnover for BSE in such scrips was Rs.34,03,470 i.e. .01% of whole turnover and for NSE is Rs.20,28,050 i.e. zero.003% and when it comes to variety of shares traded it is 1.5 % in case of BSE and in case of NSE 0.45%. This is one space the place low funds may help to move the costs and give a false sense of liquidity. Hence investors are suggested to refrain from investing in scrip simply because it's low worth; the benefit of the share should be looked into before making the investments.
The Stock exchanges have a system of guiding the traders on stock selection by way of classifying the businesses into various groups. A bunch stocks are extremely liquid and good performing corporations. B1 group are again good performing companies with lesser liquidity then A group stocks. B2 are stocks which have low capital bases and less liquid. Companies that do not adhere to Itemizing settlement are categorized as Z group. These companies do not attend to investor complaints and fail to file numerous investor associated info with the stock exchange such as quarterly working, guide closure dates and so forth. Shares which have concentrated exercise and weird worth actions are categorized in T 2 T or trade for trade settlement, ie each sale and purchase should end in supply and positions cannot be squared off during the day. This classification must be saved in thoughts whereas choosing an organization for funding. Stock exchanges additionally confirm the information ite