Why it's easy for some business journalists to make money in stocks?

Business

oi-Sunil

By Sunil Fernandes

Updated: Saturday, July 7, 2012, 10:02 [IST]

This week a leading business newspaper carried a report that FDI in multi-brand retail could get the nod after the Presidential elections.

The same day retail stocks were on fire. Koutons Retail India stock gained 14.25 per cent, while Shoppers Stop was up 11.34 per cent and Future Group's Pantaloon Retail India climbed 6.47 per cent, Trent soared 11.4 per cent, Provogue India (9.74 per cent), Brand House Retails (10.08 per cent) and Store One Retail India (4.93 per cent).

Now, had the journalist who did the FDI story picked retail stocks for himself, his friends or his relatives, a day ahead of filing the report, he/and or his acquaintances would have gained as much as 14% in a single day (it takes 365 days in a bank to earn 9.5% returns).

Earlier this week another business newspaper did a telecom story with sensitive information which saw telecom stocks spurting. Each time a business journalist has privy to sensitive information whether it's a stake sale or a government policy change, he/she has potential to make money by playing in the stock. Of course, the journalist must be from a reputed business or daily newspaper, which has credibility and decent readership.

There is a rule for analysts when they come on a business channel and recommend a stock to make a disclosure, as to whether he owns the stock or not, so viewers do know whether he has vested interest or not.

For business journalists in the print media there is no such rule. After all, you are writing on an industry (telecom, retail, banking) and not on individual stocks. However, everytime you write on the industry, individual stocks from the industry climb or fall depending on the news.

In any case, business journalist who have privy to sensitive company or industry information have the potential to move stocks merely by the strength of their story. Whether they use the information for their own gains and for the gains of their friends and relatives, is something for SEBI to monitor.

It takes days for equity analysts to analyse balance sheets, study industry trends and monitor competitors and then recommend a stock for investment. It takes seconds for some business journalist after a story is published to move stocks - a strange paradox indeed.

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