Parl panel raises concerns with Sebi over high retail participation

Draws Sebi attention to market functioning, capital influx

The Parliamentary Standing Committee on Finance has drawn the attention of the Securities and Exchange Board of India (Sebi) to the growing role of retail investors in equity markets and discussed its impact on market functioning. 
 
The panel is learnt to have also cautioned the regulator on speculative trading activity, which could lead to a spike in volatility, said regulatory sources.
  
The panel, chaired by Jayant Sinha, has also reviewed the outcome of the measures taken by Sebi in key cases, including Franklin Templeton, brokers default, and the financial crises at Infrastructure Leasing & Financial Services and Dewan Housing Finance Corporation. 
 
“We discussed a wide variety of issues on Monday with Sebi, ranging from regulatory scope, surveillance, to recent policy measures. The committee discussed the functioning of the capital markets in light of the recent volatility and what needs to be done to ensure markets continue to function smoothly through different market conditions. We also spoke extensively on capital flows into the capital markets coming from different sources, including foreign and retail investors and domestic institutions," Jayant Sinha told Business Standard. 

According to market experts, the influx of new investors is boosting trading volumes in the secondary market. This share of individual retail investors in the National Stock Exchange’s cash market turnover has shot up from 39 per cent in 2019-20 to 45 per cent in 2020-21. This share has gone up further, add experts.  
 
Retail participation in the equity market has reached an inflection point due to a low-interest rate regime. With the prospect of economic growth, the years ahead will see more people tapping into the merits of trading and investments in our markets, added an expert. 
  
It is learnt that the panel has asked Sebi to furnish detailed reports on some key issues since it believes that the measures taken up so far in these cases didn’t fetch the desired upshot.