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Stock market volatility may continue for some more time: SEBI Chief

Answering a query on Economic Survey's recommendation for the need to be vigilant of stock market movements, Tyagi said: "There is no cause of worry in terms of volatility."

Reported by: IANS, Mumbai [ Published on: February 11, 2018 0:34 IST ]
Stock market volatility may continue for some more time:
Stock market volatility may continue for some more time: SEBI Chief

Stock market volatility "may continue" for some more time due to global factors, securities market regulator SEBI Chairman Ajay Tyagi said here on Saturday.

However, Tyagi assured that "there is no cause of worry" in terms of volatility, as the country has a robust risk management system and that "there is no issue in terms safety of contracts or enforcement of contracts".

Answering a query on Economic Survey's recommendation for the need to be vigilant of stock market movements, Tyagi said: "There is no cause of worry in terms of volatility."

"Volatility, perhaps may continue for sometime, because as you see in the US, the unemployment rates have really come down, wage rates have really gone up, so, may be it is more than what was expected."

The Economic Survey 2017-18 which was tabled in Parliament on January 29, 2018 had called for a vigil against a likely stock market bubble and that "sustaining" the current high valuations require "future earnings" to meet high expectations.

After the survey report was tabled, the Chief Economic Advisor Arvind Subramanian had said that, past examples have shown that asset prices have a tendency to pull-back after they rise sharply.

On the impact of Friday's joint decision by exchanges -- NSE, BSE and MSEI -- to stop operating their indices on international bourses, Tyagi said: "... these are the exchanges which have taken the decision and they have come out with joint communique."

"These are commercial decisions which they are taking. I don't think it is retrograde."

Further, Tyagi informed that the securities markets regulator will come up with regulations on corporate bond market by September this year, in line with the announcements made by Finance Minister in the Union Budget 2018-19.

"In this budget, two announcements which have been made, they will further help in deepening the bond market. One is 25 per cent borrowing by the large borrowers through the bond market," Tyagi told reporters here.

"We will come out with regulations on this by September of this year. Obviously, those regulations will be light touch regulations because it is to encourage corporates to move towards bond market." 

Stating that the corporate bond market has been a "very good market" during the last two years, Tyagi pointed out that around Rs 6.7 lakh crore was invested through corporate bonds during 2016-17.

"This year it (investment) is likely to be surpassed," said Tyagi.

Tyagi said the other budgetary announcement on pension funds and insurance companies being allowed to invest in "A-rated" bonds will further develop the bond market. 

In the Union Budget announced on February, the Finance Minister Arun Jaitley had proposed that corporate bonds rated ‘A' grade would be permitted as eligible for investment. 

"Corporate bonds rated ‘BBB' or equivalent are investment grade. In India, most regulators permit bonds with the ‘AA' rating only as eligible for investment," Jaitley had said in his budget speech.

"It is now time to move from ‘AA' to ‘A' grade ratings. The government and concerned regulators will take necessary action."

On the budgetary proposal to tax long term capital gains (LTCG) on equities exceeding Rs 1 lakh at 10 per cent, Tyagi said: "What was thought was that markets are booming, and this dicussion has been going on for the last three years. Perhaps, it was felt that this is opportune time to do it."

In the Indian equity markets, the barometer BSE Sensex has shed around 1,900 points and the NSE Nifty over 500 points since February 1, 2018.

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