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

Ball is in govt's court, says Sebi chairman on using demat accounts for investing in G-secs

Lured by a sharp rally in stock prices, small investors are entering 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 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 for concern. However, the way it is increasing is.” He was alluding to the sharp increase in new account openings and an 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 (G-secs) 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 trust in corporations and they should ensure that the trust is not broken. He called on India Inc to remain transparent and share as much information as possible in the public domain, so that the investor community remains updated.

This was one of the reasons, Tyagi said, why the Sebi didn’t accede to the demand of allowing firms to club their June and September quarter result announcements.

“Retail investors showing trust is a great opportunity,” he said.

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

 

 

G-secs are relatively safe as they have sovereign backing and assure fixed returns. However, they, too, aren’t devoid from volatility, as they are subject to interest rate risks.

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

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

In recent months, Sebi has extended several deadlines that are applicable to listed firms as well as market intermediaries such as mutual funds and alternative investment funds.

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

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

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

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

Some players have proposed geotagging terminals so that remote access along with accountability is possible.

Tyagi also said Sebi is supportive of the use of blockchain technology for real-time settlement of trades. He said exchanges need to use blockchain on a trial basis.