No evidence of bear cartels, market manipulations: Regulator

New Delhi, Nov 22: There is no evidence of any bear cartel functioning or any kind of manipulation in the Indian equities markets, C.B. Bhave, chairman of India's markets regulator Securities and Exchange Board of India (SEBI), said here Saturday.

Speaking at the Hindustan Times Leadership Summit, Bhave said an internal study by SEBI had shown that between Sep 1 and Nov 14, foreign funds and proprietory brokerage houses had sold Rs.220 billion and Rs.80 billion worth of shares, respectively.

During the same time, mutual funds, domestic financial institutions and non-institutional investors had bought Rs.10 billion, Rs.160 billion and Rs.56 billion of shares, he said.

"This shows that markets are functioning normally and claims that every one is selling or that there is just all round selling is not borne out by facts," he said.

"There is no evidence so far that any bear cartel is operating or there is any kind of manipulation in the markets."

According to the watchdog chief, the internal study had also shown that two types of investors were selling - foreign institutional investors and clients who were leveraged - but that long-term investors were buying as they are getting shares at good values.

He said retail investors should realise that equity investments are risky. In true markets, nobody can predict whether the markets will go up or down so you cannot buy at the lowest point or sell at the highest point.

"So you should never put all your savings into the equity market," he said, adding one could also not time the markets in terms of buying or selling as nobody can possibly predict with perfection when it will rise and when it will fall.

"So never invest that money that you will need for an emergency - medical or any other - because then you may be forced to take it out at the wrong time," he said, advising that retail investors should never leverage themselves to invest in the market.

"Leveraging is a very dangerous thing and while even institutional investors should not leverage themselves too much to invest, retail investors should never do it at all."

Bhave said said the lesson to learn from the Western markets is that all trades should be restricted to exchange-traded market where a clearing corporation is able to provide counter party guarantee.

When there is over the counter trade as in the US, the risks to the financial system are enormous.

The other major lesson to learn is that at good times, if the regulator knows that institutional investors are leveraging themselves too much then the market regulator will have to intervene and stop such investors from investing in the market.

"But every crisis is an opportunity and smart investors are now buying because they are getting good values," Bhave said.

"Our markets are not decoupled from world markets and so we will feel the effects of the global crisis but when recovery starts we will recover faster than other global markets and we will emerge stronger," he said.

"Then we will have to demonstrate that we are capable of managing and regulating bigger markets and that we have the right institutions in place to ensure safety of investors."