Every newspaper, every newsmagazine, and almost every journalist, has been led by the Indian government, (through its regulatory watchdog, SEBI) to believe that the erstwhile whiz-kid broker, Ketan Parekh, has done a grievous wrong, and grievously shall he pay for it. In a moment, perhaps of extreme despair, the Finance Minister, Mr. Yashwant Sinha, also stated that market manipulators (read Mr. Parekh) should be hanged.

What did Mr. Parekh (hereafter Mr. P) do? Didn't you know - he brought the market down, and only coincidentally, brought Mr. Sinha's dream budget into disrepute. And how did he bring the market down - by market manipulation, stupid. Actually Mr. P's crime is that he took the market up to unsustainable levels, and then gravity brought the market down, and Superman Mr. P has gravity like powers and therefore should be hanged.

Price ramping, price rigging, market manipulation etc. are buzzwords that have no real meaning, at least not in competitive markets. However, if "insider information" is used to buy (or sell) stocks, then that is a financial crime. But Mr. P has not been accused of insider trading but rather fraud. And what is the fraud? That he obtained a demand draft from a bank but had no money to back it up. No one I know has been able to get a demand draft without the money having not been in the bank before, and by Indian regulations, at least six months before, backed by a tax certificate etc! So the fraud that was committed was done by the Bank that issued the cheque; maybe SEBI should be investigating a bank scam, not a stock market scam.

And why does one fraud a scam make? Better to look at the overdrafts that the various states have been making on the small savings deposits of citizens to finance their current expenditures. Now that is a scam. In any case, only one fraud in several thousand co-operative and commercial banks speaks positive volumes about our banking system.

Onwards to the other bogey of Indian babus: market manipulation, or M&M. No story I have read, or babu I have heard, has distinguished between the possibility that fraud is distinct from market manipulation, and that even with fraud one cannot really manipulate the market. The news today states that three brokering firms - among them a branch of one of the largest banks in the world, Credit Suisse First Boston - have allegedly indulged in "market manipulation". This is what Mr. P is really being accused of; the fact remains that M&M is the same as mumbo-mumbo.

It is alleged that Mr. P borrowed money and/or shares, to drive up prices of shares like Zee Telefilms and Himachal Futuristic. For every purchase of share, there has to be a sale; for every buyer, a seller. The beliefs of buyers and sellers get netted out to obtain a price. If you can manipulate a price up, you can manipulate a slide down. But what is manipulation, please. Let us say I believe that Infosys should not trade at a PE equal to Hindustan Lever, or should trade at a PE above Electronic Data Systems, a comparable firm in the US. I convince some other fund managers with the research, and they all go and buy Infosys. Its price shoots up by 33 percent in three days of trading. Is that price ramping?

Obviously not. So what did Mr. P do wrong? He went and stated to fund managers and venture capitalists, including Mr. Kerry Packer, that certain shares were a "steal"; they went and bought Himachal at Rs. 1000, its share doubled and Mr. P was a genius, and now the share is Rs. 100, and Mr. P is not only stupid but should also be hanged. I don't get it.

Now assume that Mr. P was given information about good earnings reports (for a bull) and bad earnings reports (for a bear) before the market received the same information. That is insider trading and the laws for the same should be a de-listing of the companies shares from the stock exchange and a barring of Mr. P from practicing broking, and a stiff financial penalty; but no hanging, please.

What about Mr. P obtaining a pay-order without having money in the bank? If you are able to obtain a loan far in excess of your assets, then you are a better man than I - or you have a very friendly banker. The person who is derelict in his duties is the banker - he should be fired. What if Mr. P stated in his loan application that he owned 1 million shares of Himachal and at the time of application the share price was Rs. 1000. In a few days, and after the loan application is approved, the share price falls to Rs. 500. What's the problem? Mr. P cannot pay back his loans, the bank manager is fired for loaning him the money, and Mr. P declares bankruptcy. Where is the fraud?

Assume now Mr. P had stated in his loan application that he had Rs. 100 million in bank account X, or that he had a Ph.D, and that possession of a Ph.D affects his ability to repay the loan. In both cases a fraud has been committed, Mr. P should be debarred, and the bank manager has committed no crime, etc.

Is there an explanation for the panicky reactions of government authorities to a hugely normal occurrence i.e. the market going steeply down. To provide some perspective: most stock markets in the world are down about 40 to 70 percent from their respective 2000 highs. Remember the Nasdaq-Sensex correlation? Well the Nasdaq was down about 60 percent at its worst, and the Sensex about 50 percent. I have not read about market manipulation, or market Supermen being arrested anywhere else in the civilized world. I have heard about a lot of dreams turning sour, and a lot of people, actually every investor in the world, losing money. What makes us so different? Why are our stock price declines indicative of "market failure"?

Last year, all (Indian and world) investors went ga-ga about easy profits, and ended up making huge losses. Indeed, by the time the Indian government got into the act (after Budget day) most losses had been realized! Why a "who is manipulating the market" witch-hunt by the Indian government ? Because the market fell in the face of a genuine dream budget. I admit to also being shocked by the markets decline post budget day. But my explanation has no room for market manipulation; it does have some room for hypotheses about insider trading - namely, some people knew about the Tehelka revelations, and used this "material market information" to short-sell, in huge quantities, the shares held by the overly-leveraged Mr. Parekh. Instead of calmly attempting to test  "insider information" links, the government, with wacky hypotheses, wackier statements, and wackiest witch-hunt, made investors run for the exit door and made a very bad situation into a nightmare. All in the name of Indian justice, and in the name of the small investor, of course.