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Media toys around with markets

A section of the media has encouraged companies to part with shares in exchange for advertisement space. This has given rise to a vested interest in manipulating the Sensex.

"They" provide us a running commentary from morning till late evening. "The morning session is crucial," they say. And if you thought that was a cricket commentator talking about the first hour of play, you are mistaken.

These are market commentators. "The middle session is crucial" and subsequently "the final hour of trade is crucial." Repeated use of the word "crucial" is aimed at turning on the viewer and making him believe that something big is happening.

This live relay is further followed by expert analysis till late into the night. If you thought "they" were merely commentators, you are possibly wrong. "They" have a deeper and a far more complex agenda — of influencing the minds of the viewers.

Talking up share prices or talking them down is part of the strategy of these "anchor investors". Thanks to the silence of the market regulator, SEBI, all these have now come to be characterised as acceptable.

At the height of the stock market collapse in October 2008, even the Government was clueless on how to act against the loaded presentation of the global economic crisis by sections of the media. With the stock markets tumbling by the hour, these players had a field day. In a way it was a self-fulfilling prophecy. The more they created panic in the minds of viewers, the more the markets went into a tailspin.

But if you thought that this phenomenon was limited to the stock markets, you are wrong. There was tremendous media attention given to the failure of the monsoon last year. The Economic Survey 2009-10 blames the media for "hyping" the failure of the monsoon leading to fear of shortages, consequent hoarding and inflation.

ROLE OF PRIVATE TREATIES
Attempts at influencing stock markets are not limited to the electronic media. Some within the print media do it quite as brazenly, but in a different way. Interestingly, this is marketed as a "business strategy" under a novel concept of "private treaties". These are, in effect, commercial agreements between a media house and corporates, linking their business interests through advertisement and equity.

What is interesting in this contract is that corporates allot shares to the media house. In consideration, the media house allows advertisement space to the corporates. In the process, the Chinese walls of the past, between advertisement and editorial, have virtually collapsed. Instead, we have a new concept of ‘advertorial'. Consequently, reporting adverse news about such corporates is a commercial impossibility.

The idea of brand-building through private treaties is explained through a presentation available on the group Web site of leading media house through a set of rhetorical questions. How do you invest in building a brand and manage cash flows at the same time? How do you convince the cold-blooded accounting department that brand equity can perhaps be your single biggest asset? And yes, where's the money going to come from?

Seeking to answer these questions, the power point presentation states that "we invest in the long-term potential of your brand. We believe that strong products and services, when branded right, have the power to transcend their natural growth paths and turbo-charge their balance sheets."

It would seem that branding can come about only through advertisement in the media, and that too only with the said group. Such brazenness would not have been possible even a decade back.

Obviously, on account of such positions and investments, manipulating sentiments to manage market indices has now assumed alarming proportions. After all, investment via private treaties turns positive only if the advertiser's stock performance is positive. And that is the crux of the issue — while there is nothing illegal about the contract per se, what needs to be factored here is that private treaties are potential causes for interested reporting by the media.

QUESTION OF CREDIBILITY
Press reports suggest that SEBI has written to the Press Council of India (PCI) on this matter last year. Not much has been heard till date. For obvious reasons, sections of the media are not reconciled to the idea of transparency, disclosures or regulations, little realising that both the media and the regulator — SEBI — are fast losing their credibility.

The least the PCI can do is to publish its draft report (containing names of the errant players), while SEBI should examine whether these arrangements violate the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. Alternatively, newer regulations must be introduced to curb this menace. Else, the Indian stock market would resemble a rigged casino.

Last modified on Sunday, 07 July 2013 07:36

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