The Securities and Exchanges Board of India (SEBI) is assessing the impact coronavirus issue will have on the Indian stock exchanges. The stock indices have been going downhill ever since the virus started spreading to many countries. The Indian stock markets generally follow the trends in most international indices like the NYSE, NASDAQ, FTSE and others. This time it was no different as almost all markets around the world collapsed mainly due to the fear that the Chinese manufacturing sector’s setbacks will affect the markets all over.
The news of SEBI making an internal assessment was shared by a Whole-Time Member on the SEBI board, S.K. Mohanty.
There is one more body formed by the government, Financial Sector Development Council (FSDC). According to Mohanty, the FSDC has not so far been involved in these discussions.
Whether it is SEBI or RBI, it is not possible for them to simply sit back and watch when shareholders’ wealth is being blown away within just a few sessions, following such panic reactions. Many retail investors may lose confidence in the markets itself, which can have serious long-term implications for all stakeholders. Mohanty says SEBI is taking steps necessary to address the crisis.
The Federal Reserve of the US announced an interest rate cut of 50 basis points, which came as a surprise to many. Other central banks across the world, including RBI have assured of help in stabilizing the markets.
Mohanty also addressed a summit at Assocham on capital markets and shared some more views. He said SEBI cannot directly intervene in issues like the dividend distribution tax (DDT) on real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) introduced in the last budget.
However, he said SEBI has opened a dialogue with the central government on the issue trying to reason it out and see if it can be amended to be restored to the previous status. In Mohanty’s opinion, the removal of DDT and incentivising these bodies could bring in billions of dollars in investments into the country. Figures indicate that $20 billion investments came in through REITs and InvITs and this figure could go up further if this budget proposal had not come in the way.
Another point raised by Mohanty in his address at Assocham related to the trend of companies shying away from listing their companies in the stock exchanges mainly due to the amount of disclosures and compliances they have to adopt. He says there has been just a 1% increase in the number of listed firms in the country in the last three years.