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A Lion’s eye on the Bulls and Bears

“In India, companies may fall sick, but promoters rarely do!”

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October 14, 2008

Investment Guru Mark Mobius calls for an end to Short Selling…I disagree

Investment Guru,Mark Mobius, calls for an end to Short Selling…”Short Selling is Not Investing.We have to seperate Investing from Gambling……We’ve got to get back to the fundamental concept of the stock market-the supply of Capital,the raising money for Growth” says he. 

Mr Mobius,with due respect to your justified sentiments in these troubled times,I disagree.

Although I too don’t Short Sell as I believe it creates Wealth by actually Destroying Wealth…if you know what I mean !

But Short Selling has a definitive Role to Play.

Speculation is the lifeline of a thriving Secondary Market.Ofcourse it must be controlled and regulated and not allowed to become wanton or reach dangerous proportions

Short Selling serves the twin purpose of fair price discovery and share availability…it is only it’s misuse that creates the anger and angst.

For example if Infosys in India was traded at an excessive price of Rs 16000,like it did in 2000,at crazy triple digit P/E multiples why should I not be allowed to put my money where my mouth is and short Infosys…It dropped to below Rs 2000 at one stage

I’m sure you wish for Short Selling to be banned across all Asset Classes and Derivatives…..Was George Soros wrong in shorting the British Pound in 1991 to make his Billion ?…The Pound was clearly overvalued at the time as England refused to join the ECU and the Central Bank tried in vain to defend the Pound…If I recall it spend 44 Billion Pounds to do so 

Also the Secondary Market will thrive if there is continuous and adequate Liquidity and availability of Stock

By a Blanket ban on Short Selling, as you have strongly called for,Mr Mobius,you would be throwing out the Baby with the Bathwater.


CORE PROJECTS….Crashed from Rs 250 to Rs 60 in three trading days…What did you expect ?

I’ve been inundated with calls on Core Projects…because on October 8,2008 it was Rs 250 and today it is Rs 63…Why this Sudden Collapse ? Will it revive ?

Top Broking Houses had recommended this scrip very strongly in 2007 and earlier in 2008…In fact the Aditya Birla Group, through it’s Private Equity Business,had also invested earlier this year in this Company by subscribing to 4.5 lakh warrants to be converted at Rs 303…Consequently their Private Equity CEO came on the Board of Directors…Doubt if they will opt for conversion

Obviously there has been plenty of selling.Yesterday NSE showed a trading volume of 4.28 cr shares with just 26% Delivery !….DNA reports that grapevine has it that India Bulls sold over 60 lakh shares and ILFS sold more than Five lakh shares as margin calls were not paid up

Who speculated with the 74% non delivery abnormal trading volume of over 3.16 cr shares ?

This is blatant insider trading and SEBI must inquire into this

But all are asking….Now What ? Will Core Projects recover ?

June 30,2008 Shareholding shows over 20700 shareholders,including 15 FIIs, holding over 8 crores of the outstanding shares

The way I analyse any company is in the sequential steps as below

  • Integrity and Credibility of Promoters and the Board of Directors  
  • Business Model
  • Financials
  • Valuation

If at any stage  I have strong reservations that don’t dissipate even after a more thorough diligence, I don’t move to the next stage. 

In Core Projects at the First Stage of Analysis itself I was shocked when I saw a name on the Board of Directors of Core Projects…a name that revived some nasty old memories…with such a Man on Board..he also chairs another Listed Company in the Renewable Energy Business….Reuters show him as Director in several companies dealing with Software and Wellness…business sectors that hold potential and therefore have a suckers potential quotient too…especially where there is little evidence of any domain expertise in such business ! …..what else can you expect but capitulation !

The website of Core Projects profiles him as a Finance Wizard !

In the 1990s he was heading a listed company Damania Capital Markets (DCML…IPO at Rs 30) and also had promoted a NSE Broking Outfit, Fastrack…..later called Fiscal Ltd

Both went bust.

DCML has long since been delisted and there is no trace of this company now

It has been one of my biggest regret’s in Investing Life to have been associated initially with the Damania Group and the Promoters coterie which included this Director….not only did I fail to see through their intentions but my clients and I were victims when this group and their associates companies went bust…monies were tied up with them in shareholdings and loans…One only Lives and Learns !    read more

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