X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

End of road for India Inc in black money
Wed, 24 Dec Pre-Open

When it comes to black money, India's tryst with the illegal receipts and payments has been fairly damaging to the economy. In fact as we recently wrote in The 5 Minute Wrapup, the export of illegal funds from India has grown 9 fold in the past decade. In 2012 alone, US$95 bn of black money was siphoned off from India. Though this may be less than that of China which saw US$250 bn getting shipped away, the gap has narrowed over the last 10 years. So much so that India is expected to soon catch up with China and be crowned as the black money capital of the world.

Needless to say, corruption and crony capitalism have laid the foundation of the black money crisis in India. However, the lack of corporate governance has had no small role to play in stoking the trend of corporates misusing regulatory loopholes to create black money. The capital market regulator, SEBI, too remained largely silent when case of company hoarding unaccounted cash in their offices was unearthed.

However, the regulator seems to have now woken up to smell the coffee. As per an article in Business Standard, SEBI will head a multi agency probe examining the role of over 100 companies in money laundering. Considering the number of companies involved, regulatory forces are pegging the quantum of the scam close to Rs 200 bn! SEBI's initial investigations also reveal that most of these companies exist only on paper. And the sole reason of their existence is to convert black money into white. Further, the regulator will also probe roles of traders that acted in concert with the promoters to artificially rig volumes and prices of the stocks.

Corruption, scams and actions that hurt the interest of minority shareholders have already taken a toll on the level of trust that corporate India enjoys. The regulator's actions against corporate money laundering will therefore go a long way in dissuading corrupt practices. More importantly it should ensure that the auction and allocation of natural resources like mines etc is completely transparent.

For investors it is important to remember that investing in companies with questionable managements is akin to playing with fire. Regulatory tightening will ensure that such companies trade at a huge discount to their peers. Therefore investors should not get carried away by big names but choose the companies with robust fundamentals, management integrity and sound corporate governance practices.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "End of road for India Inc in black money". Click here!

  

Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS