Who drives the capital market ? (?)

There are active Capital Equities Markets, Bond Markets, Commodities Markets and such similar financial instruments' markets present in almost all developed & developing countries. And if you are watching TV and screening through channels, you would have come across a set of channels that are dedicated to news, discussion related to these markets.

- Do you ever wonder how these markets actually function and behave (sentimental vs. fundamental) ?
- Do you keep hearing words like 'market fundamental' or 'fundamentals of the company' or 'fundamentals of economy' over and again and especially when equities market tumbles down.

Some 4-5 years ago, I heard a story about a man-from-city (MFC) who goes to village-close-to-jungle and offer them to buy monkeys caught from jungle from them and to sell those to foreign circus owner in city. Then how he (MFC) was able to fool the poor-village-people with rising prices for monkey, then poor-village-people starts fighting among themselves to grab more monkeys and how MFC takes away most of the money from them.

Why I am talking all these?
I came across this ET article FII biggies cashing out on listing gains. It claims that the FIIs like CityGroup, Morgan Stanley, Goldman Sachs, etc aggressively bid for share allotment for initial public offering (IPO) and book the profit by selling those shares on the listing day itself.

Entity	Company IPO	No. of share sold
Citigroup	Indosolar	22.2 million
Goldman	Orient Green	3.4 million
Merrill	Microsec Financial	Exact Number not available
Morgan Stanley	Prestige Estates Projects	Exact Number not available

Generally, if you look at holding pattern of the listed company, apart from promoters, it's major financial institutes who hold 10-20% of the holding and retail investors hold somewhere around 10-15% of the stake in the company. It is a very obvious characteristic of Retail investor: that they are dispersed and not united whereas the not many FIs hold stake in a company and 'can' form 'cartel' and from above example, I keep guessing if this is the case.

Even if you are tracking the statements by regulator (in this case Securities Exchange Board of India i.e. SEBI), SEBI in last month has criticized the Investment Bankers for placing higher premium for companies going public. The investment Bankers are those people, who help companies/government in underwriting, issuing securities i.e. making a company - public listed. So coming back to SEBI's discomfort with Investment Banker: SEBI Chairman - CV Bhave pointed out that since Investment Banker sets higher rather unreasonable premium at the time of listing and or last couple of years (with some exceptions) the listing of companies has dismayed the investor because on the day of listing, the opening price of share of companies have been much lower than the list/bid-band price. Thus investment bankers are not keeping in mind the interest of investors while deciding on price-band.

I will just say that, when regulator says that interest of investor are compromised ; it means the fundamental of the company becomes questionable and retail investor will turn its back at IPOs (Can I say, CIL is exception? ).

There is a famous term in investment banking:: 'Chinese Wall'. It refers to information barrier/ firewall maintained to isolate the investment related decision makers /centers from others who can influence them.

With above examples in mind, and recent incidents in US capital markets; sometimes the the way such market function; fundamental of market become questionable and it's the responsibility of prime stakeholders i.e. FIs, regulators, corporations to make sure, market fundamentals to be highlighted as prime factor of putting money into it.