Unlike last year when every news about the stock markets led to mourning sessions among stock brokers, fund managers and retail investors, this year has started with some reprieve. While the topsy-turvy road to stock markets still has some potholes, the positive data on economy and jobs is bringing back cheers on many a faces.
There has been a growing interest among retail investors in India to tap into the stock markets in hope for quick returns. Interestingly, this is a group of investors that goes by the word of mouth in a big way. Many of the retail investors either dabble in the markets on their own or take help from a colleague or a friend or consult stock brokers but do the deal themselves. With the tempo in the markets returning, many retail investors are now willing to put in more money in hope of making rich profits.
Those leveraging on the psyche of retail investors are mobile operators and stock broking firms who are tying up to provide regular updates to investors. These updates are related to the movement of stock prices and tips from the so called "experts". Business news channels and financial dailies don't want to miss out on this important breed that takes the advice quite seriously.
The impact on social networks
Now imagine a scenario wherein stock updates on mobile phones becomes a norm, so much so that almost every individual subscribes to the service and takes cues on investing in share market on a regular basis. This means that every individual is or could be an investor. With minute-by-minute updates on stock market, it would be quite a temptation to follow on the "tips" and buy and sell stocks at the push of a button.
What will this lead to? A quick and largely varied fluctuations in the stock market index. With so many investors active on the market buying and selling only based on herd mentality, it would be quite a pain for companies whose stocks are most widely traded. With so much power in the hands of retail investors that they can cause crazy fluctuations in stock prices, there could be a fresh battle everyday to bombard them with news and tips and comments and analysis about each stock.
Given that every company would want to see its stock value either stabilize or rise on a regular basis, it would compelling for companies to circulate favorable information about their performance so as to prod retail investors to buy more into them. On way they can do this is by using social media as a tool. One shouldn't be surprise if tomorrow we see companies flooding Twitter timeline with their hourly news bulletins carrying only favorable news about them. This could lead to a battle of sorts among companies wanting to find favor with retail investors. The social media could be the perfect battleground for stock manipulation for companies whose only motive is to make profits and see their stock prices touch new highs every day.
Now enters the government. As always, in the projected scenario there would be a need for regulation, a need for reining in the corporate war to manipulate stock prices. With the regulatory mechanisms in place, it would be a tough call for the government to keep track of the information that circulates through social media networks. But the big question is how? Or Will the government be able to monitor activities in social media where every second brings a deluge of information that no one know who will consume and how?
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