Two months after Reserve Bank of India (RBI) Governor Shaktikanta Das said there was a clear disconnect between the sharp surge in the stock markets and the state of real economy, Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi on Wednesday said the recovery in the market has been “broad-based” and the participation in the equity market is “higher now than ever before”.
After the declaration of pandemic in March 2020, the lower circuit breaker was triggered on two occasions within a span of just two weeks —an occurrence which has never happened in the past. “The Volatility Index VIX went up to 84 in March from an average of 15 in the previous 3 months. SEBI took some timely surveillance measures with respect to exposures and margins to curb volatility. The markets have recovered well since then,” Tyagi said.
During April- September 2020, 63 lakh new demat accounts were added as compared to 27.4 lakh accounts during the corresponding period last year, an increase by around 130 per cent, he said at the CII Financial Markets summit.
“It is not just the large cap but also the mid- and small-cap indices which have recovered since the lows hit in March 2020. While the large cap and mid cap indices have increased around 55 per cent, the small cap index has increased around 70 per cent,” Tyagi said.
While statistically the indices could go up because of certain stocks that have relatively high weights, Sebi’s analysis shows the recovery is not only in the heavyweight stocks, but is across the board in the index, he said.
The market recovery happened even as GDP contracted 23.9 per cent in the June quarter. The Sensex, which hit a low of 25,638.90 earlier this year, closed at 40,707.31, a rise of over 15,000 points, on Wednesday.
The domestic equity market received around $11 billion of net FPI investments to date in this financial year. “While most emerging markets including Brazil, Taiwan, South Korea, Thailand, South Africa and Malaysia saw FPI outflows in calendar year 2020 so far, India has witnessed net FPI inflows in the same period,” he said.
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