Sebi Chairman Ajay Tyagi said on Thursday the growing disconnect between financial markets and the real economy seen today has no precedent and agreed with other regulators that it poses a risk to stability systemic.
“In general, the stock markets have been barometers of the economy and move in the direction that the economy is changing or is expected to move. However, after the start of the pandemic, several institutions, including the Financial Stability Board and the RBI, raised concerns about a growing disconnection of financial markets from the real economy and the potential risk this could pose for systemic stability, ”he said in a speech. during a conference organized by Sebi and the NISM.
Tyagi called the market movement across the world “unprecedented” and said it was a result of measures taken to combat the pandemic. He said the fall, recovery and overall market movement “are significant and unprecedented.”
The head of Sebi highlighted the drastic change in behavior of foreign portfolio investors (REITs).
“REITs have already made a net investment of over $ 35 billion in this fiscal year in Indian stock markets, which is the highest of any fiscal year to date… This is a testament to the confidence of global investors in the Indian economy and markets as a whole, “he said.
Tyagi also pointed to the growing trend of increasing retailer participation in the stock market.
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“While increasing the demat accounts from 3 crore (30 million) to 4 crore (40 million) took about 28 months, the increase from 4 crore to 5 crore took only about 10 months,” he said. he declared.
On the other hand, Tyagi said that entries through the systematic investment planning (SIP) path of mutual funds (MF) were declining.
“This downward trend could be indicative of a tendency for individual investors to use funds previously dedicated to SIPs to invest directly in the market or in other assets such as debt, real estate or even possibly to conserve cash. pending market corrections, ”he said. noted.
Tyagi further said that the share of MFs in total average daily turnover in the NSE cash segment increased from around 7.5 percent in the previous fiscal year to 5 percent in this year. exercise. Likewise, in the NSE equity derivatives segment, it fell from around 4.3% to 3% over the same period. The share of individual investors in transaction turnover has increased.
Tyagi said the risk aversion observed by credit funds following the pandemic and the closure of some plans had reduced over time.
He also said the influx of liquidity triggered by actions by global central banks, including in India, had facilitated large bond issuances by companies. “In this fiscal year through January, Indian companies raised around Rs.6.5 trillion in the bond markets, an increase of over 22% from the same period last year.”
The market regulator is also in active discussion with various stakeholders to provide greater granularity in disclosures by listed companies in the area of ESG (environment, social and corporate governance).
“We plan to publish the relevant guidelines soon. The proposed guidelines aim to achieve a much higher level of transparency and accountability of listed entities in the ESG area, ”said Tyagi.