Will Goldilocks turn into Icarus?

"Active investors regularly track company disclosures and adjust their portfolios depending on the nature and substance of announcements," noted an editorial in the Mint. "However, insider trading is said to be fairly prevalent in the Indian stock market. A recent report by Reuters lends credence to such claims. It recorded at least 12 cases of prescient messages regarding listed companies on WhatsApp groups." "There are closed networks that tend to get information about companies well before the general public," wrote M Sharma. Stock exchange regulator, Sebi, has one employee for every 6 listed companies on the stock market, while the SEC in the US has one employee for each listed company. Companies are controlled by families, known as promoters, who plunder their companies by restricting the information available to shareholders. Reliance Industries, India's largest conglomerate, was fined Rs 4.47 billion in retracted gains and Rs 5 billion in interest for insider trading in stocks of its subsidiary. But unlike Rajat Gupta, who received a 2 year prison sentence for insider trading in the US, no one was charged. Instead, Reliance was allowed to appeal to the Securities Appellate Tribunal which fortunately dismissed the case. Few people in India invest in shares probably because they do not want to risk their meager savings. However, in the past one year investment in mutual funds increased by Rs 4.8 trillion  to Rs 9.8 trillion, an increase of 31% over the previous year. While the domestic savings rate has been falling investment in financial instruments is rising, wrote N Rajadhyaksha. Is that a good thing? At a price-to-earnings ratio of 24.53, India was the most expensive market in the world, one month back. A Barman thought that our market has reached a Mary Poppins moment. Most of the trading is concentrated in a few stocks so the market index, the Sensex, does not reflect the true value of the market, wrote A Banerjee. The government is pushing more money into shares by forcing employees' provident fund and other government controlled entities to invest in them. Not just in India. Bank of America Merrill Lynch has named trading in stocks as 'Icarus trade', meaning it is flying close to getting burnt, wrote M Chakravarty. In the bank's survey, 9 months back 26% of global fund managers were holding 4.9% of their portfolio in cash. Today the cash component is down to 4.4%. "The number of fund managers in the survey taking higher-than-normal risks is at an all-time high, the proportion of fund managers believing in the Goldilocks scenario of above-trend growth and below-trend inflation is at a record high." We are living in a fairy tale world. With Christmas coming, fund managers must be waiting eagerly for Santa.