MKT-ECONOMY DISCONNECT UNPRECEDENTED: SEBI CHIEF

Securities and Exchange Board of India’s Chairman Ajay Tyagi on Thursday said the current disconnect between the financial markets and the real economy had no precedence and concurred with other regulators that it poses a risk to systemic stability. The Sebi chief underscored the drastic change in the behaviour of foreign portfolio investors.

Captial market regulator Securities and Exchange Board of India’s (Sebi’s) Chairman Ajay Tyagi on Thursday said the current disconnect between the financial markets and the real economy has no precedence and concurred with other regulators that it poses a risk to systemic stability.

“Typically, stock markets have been barometers of the economy and move in the direction the economy moves or is expected to move. However, after the onset of the pandemic, several institutions including Financial Stability Board and the Reserve Bank of India (RBI) have raised concerns of an increasing disconnect of the financial markets with the real economy and the possible risk it may pose to systemic stability,” he said at a conference organised by Sebi and the National Institute of Securities Markets (NISM).

Tyagi termed the market movement across the globe as “unprecedented” and said this is because of steps taken to tackle the pandemic. He said the fall, the recovery and the overall market movement “are significant and unprecedented.”

The Sebi chief underscored the drastic change in the behaviour of foreign portfolio investors (FPIS).

“FPIS have already made a net investment of more than $35 billion in this financial year in the Indian equity markets, which is the highest in any financial year till date… This signals the confidence of global investors in the Indian economy and markets as a whole,” he said.

Tyagi also highlighted the growing trend of increased retail participation in the stock market.

“While the increase in demat accounts from 3 crore (30 million) to 4 crore (40 million) took around 28 months, increase from 4 crore (40 million) to 5 crore (50 million) took only around 10 months,” he said.

"FPIS have already made a net investment of more than $35 bn in this financial year in the Indian equity markets, which is the highest in any financial year till date… This signals the confidence of global investors in the Indian economy and markets as a whole” AJAY TYAGI Chairman, Sebi