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Make gradual entry in mkts, understand risks: Sebi chief to small investors 

Lured by the sharp rally in stock prices, small investors are entering the markets in droves. The stock market watchdog, however, has a word of caution for them - make a gradual entry, understand the risks and take well-informed decisions.

Speaking at the industry body FICCI’s annual capital market conference Capam, Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi) said, “Increased retail participation isn’t a cause of concern.” He was alluding to the sharp increase in new account openings and increase in share of retail investors in overall market volumes.

“It has to be a more gradual entry. They should start by investing in government securities (gsecs) and later move on to other products. They should take well-informed decisions,” he said.

Tyagi said increased retail participation is a sign that investors are putting a trust in corporates and they should ensure that the trust is not broken. He called India Inc to remain transparent and share as much information as possible in the public domain so that the investing community remains updated.

This was one of the reasons, Tyagi said, why Sebi didn’t accede to the demand of allowing companies to club their June and September quarter result announcement. “Retail investors showing trust is a great opportunity,” he said.

He said currently the ball is in the government’s court when it comes to allowing use of dematerialized accounts (dmat) for investing in g-secs.

G-secs are relatively safe as they have sovereign backing and assure fixed returns. However, they too are devoid from volatility as g-secs are subject to interest rate risks.

Tyagi said the equity markets are geared up to support the dream of $5 trillion-dollar economy. However, more work needs to be done on the debt market side. “Despite record selloff in March, there were no defaults in payments. This is a demonstration of strong fundamentals and systems of the equities platform,” Tyagi said.

India Inc leaders hailed Sebi and Tyagi for working without a break, ensuring market stability and providing much need relaxations over the past few months.

In recent months, Sebi has extended several deadlines which are applicable to listed companies as well as the market intermediaries such as mutual funds, alternative investment funds.

When questioned whether Sebi plans to extend some of these deadlines, Tyagi said, “All the relaxations have a sunset clause. Sebi will take a call as and when required whether to provide further extensions.”

On the issue of direct overseas listing, Sebi said no company has yet come forward with the proposal of dual listing.

The Sebi chief said it needs to be examined whether brokers can be a permanently allowed to ‘work from home’. In March, Sebi had allowed broking houses operate their trading terminals remotely.

“It has been a temporary measure. However, considering the success, it needs to be examined more carefully. The downsides of this also need to be considered,” he said.

Some players have proposed geo-tagging of terminals so that there is accountability at the same time remote access is a possibility.

Tyagi also said Sebi is supportive of use of block chain technology for real-time settlement of trades. He said exchanges need to use block chain on a trail basis.

 

 

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Event:

 CAPAM 2020