Amid market-economy disconnect criticism, Sebi chief Ajay Tyagi lists positives

As criticism mounts about there being a disconnect between the equity markets and the economy, Sebi chairman Ajay Tyagi on Wednesday said there are some positive aspects as well in it, and termed the recovery in the capital markets as broad-based.

“We have observed that recovery has been broad-based. It is not just large caps but the mid and small cap shares have also recovered,” Tyagi said.

It can be noted that after a massive correction after the WHO announced this as a pandemic, markets have recovered swiftly and are near their all-time highs of January 2020.

Even within the indices, the recovery is not just in heavyweight stocks but across the board, Tyagi said, adding that 90 per cent of the stocks on the NSE has yielded positive returns in 2020.

He acknowledged that there have been talks of the market movements being fuelled by liquidity and there being a disconnect between the economy and the markets.

In the April-September period, 63 lakh new Demat accounts were opened as against 27.4 lakh which is a 130 per cent increase, while the foreign portfolio investors' (FPIs) flows stood at a net $11 billion in the same period even as other emerging markets were in the negative territory.

After the outflows in March, especially in debt schemes, we have seen inflows of Rs 1.47 lakh crore in the first half of the fiscal.

Total funds raised by corporates from rights issues, initial public offers (IPOs) or follow-on public offers stood at Rs 1.54 lakh crore, which is just a shade lower than the Rs 1.58 lakh crore in the year-ago period, he said.

Over Rs 3.8 lakh crore has been raised in the debt markets which is 25 per cent higher than the year-ago period, he said.

Sebi's measures during the Covid-19 pandemic have helped the capital markets and the regulator will continue to be vigilant to respond to any rapid movements, he said.

The corporate bond market needs to become more robust because there is an urgent need to diversify funding requirements from the banking sector, Tyagi said, stressing that this is important to achieve the infrastructure investment targets set by the government.

Tyagi said Sebi has seen a jump in independent directors' resignations in the last two years and urged them to come forward and share details if concerns related to corporate governance have resulted in the decision.

The independent directors are representatives of the minority shareholders, he said, adding that the independent directors are a “puzzle” for the capital markets regulator.

On the concerns being expressed by FPIs on faster settlement of trades to T+1, Tyagi said such a move is in everybody's interest, but acknowledged that there are concerns being expressed by some. Sebi is yet to finalise its decision and will do so after consultations with all the stakeholders, he said.