#adigitalblogger #Insidertrading #sebi
How Insider Trading Kills Stock Market?
Sebi has taken up a total of 177 insider trading cases for investigation since April 2017 — an average of around 38 cases a year. In fact, SEBI has admitted that in recent years share price rigging has died down and is less of a threat but Insider cases are the real headache. But apart from SEBI, the whole Indian Stock market ecosystem including Big Institutional investors, FIIs, listed companies and common retail investors feel the pain too.
Illegal insider trading is unfair to retail investors as they are too late for the race already won by insiders. Retail investors, who had no access to such information, hold the shares and become the ultimate loser which is very detrimental to the market.
And when retail investors who according to recent data hold about 10% of market participation, lose confidence in the market due to insider cases, and with that company listed or about to be listed will find it difficult to raise funds, therefore affecting their business, in some cases fundamentals, and even indexes.
Another major participant in the Indian stock market is FIIs. If insider cases rise, inversely proportional to that, the trustworthiness of India’s financial system will decrease. Therefore FIIs will avoid investing in India, which could further deplete resources for Indian firms. And to gain trust back is no easy job.
If insider trading cases, caught or otherwise, do not decline in India, it could effectively leave the least number of outsiders as investors, in which case only insiders will be left and hence Insider Trading will no longer remain an issue. But this solution to insider trading is not desirable to benefit this nation.
source
46 Comments