Jan 22, 2008

Indian Stock Markets Deep Dive and the Media

The Sans Serif blog has an interesting perspective on how first time investors who were reading about the Indian stock market's earlier dizzying run are now blaming the media.

As the stock markets had soared, the Indian media had thrown all balance to the winds, painting the “India Story” as one which would never end. When the fledgling Reliance Power was making its initial public offering last week, television stations were offering advice on how to open demat accounts.

Little wonder first-time investors are blaming the media in an indirect sort of way for not cautioning them enough, for painting so rosy a picture that they thought there was no dark side.

The BBC’s Karishma Vaswani quotes one first-timer:

“I thought this (the stock market) was somewhere I could put my money safely and grow it, rather than putting in the bank like my dad did,” said Gauravi Sharma.

“My parents had never invested in Indian shares, they said it was unsafe. But I thought, after everything I heard on TV and in the news, that this was the right place to put my money. Now I’m not so sure.”

Which just goes to prove that media (whether mainstream or social media) is not the final arbiter of truth. Before you put your money/time into something (like stocks/employer/advertising), do some basic research independently. That means looking at more than one news and information source. The trouble with most of us is that we like to follow the heard and not use our brains. And then we blame the media. Remember that journalists are people out to make a living and media publications are turning into more and more of business entities.

  • the Times Group/BCCL picks up equity in young fledgling companies (as a '05 article in Business World explains, "these companies are in their growth phase and have other working capital priorities."

  • the company ploughs back that same money for advertising support in Times Group/BCCL (as the head of Times Group Head of Private Equity explained, this arrangement aims at "helping emerging companies realise the power of advertising")

    Everyone wins... And after all there is no law that says that a media house cannot also be an equity investor in its advertisers!

    so what is the catch?

    Not that one needs to guess that, but as this article in Busines Standard explains:

    "The “private treaties” can be defended in theory — on the basis of the claim that journalists in the publications concerned are free to write what they want about any company, and are not duty-bound to sing the praises of the companies whose shares the publisher holds. The bitter truth is that this is hogwash —the Chinese walls that used to separate editorial and business departments in most newspapers have become porous, and in some cases have been demolished without ceremony. Evidence that has surfaced supports the view that journalists in the affected publications are being asked to play the piper’s tune. So from a journalistic standpoint, there is nothing to be said in defence of space-for-shares barters."

  • Too bad, that there are not as many newspapers as there are blogs. And unsubscribing from a newspaper was as easy as unsubscribing from a blog.

    The business student in me is fascinated however, by the sheer innovation of this approach. Any idea if something similar has been done outside India?