The liquidity stress affecting non-banking finance companies and housing finance companies since September 2018 has abated significantly, and the Indian markets have performed better than several developed markets despite high global volatility this year, the chief of India’s stock market regulator Ajay Tyagi said on Friday.
The Securities Exchange Board of India (SEBI) Chairman said that the role of capital markets in facilitating fund raising to sustain the country’s economic growth momentum ‘becomes even more important given the stress in the banking sector.’
The volatility in global markets, caused by factors such as uncertainty in oil prices, change in monetary policy stance of central banks like the U.S. Federal Reserves and U.S.-China trade tensions, is likely to persist, Mr. Tyagi said at a financial markets summit.
Domestic issues
“These factors have also affected Indian markets, as well as domestic issues such as NBFCs and housing finance companies facing tight liquidity since September 2018, although it has improved much on account of steps taken by the RBI in providing systemic liquidity,” the SEBI chief said.
Despite the high volatility in the Indian markets compared with ‘previous years when markets were just rising and people almost thought they provide assured returns, the performance of Indian capital markets has been comparable, not much worse than the comparable jurisdictions,’ Mr. Tyagi said.
Better, not worse
While the Nifty has moved up 6.5% in rupee terms in 2018, the Dow Jones has returned 8%, UK (-1%), China (-18%) and Brazil (5.7%), he pointed out. Volatility in the Indian equity market has been 12% this year, compared to developed markets like U.K. (12%), U.S. (16%), China (19%), South Korea (14%), Japan (17%) and Hong Kong (19%). The Indian rupee has depreciated 7% against the U.S. dollar, almost the same level as the Japanese yen (7.3%) and better than China (10.81%), U.K. (10.10%) and Brazil (16.85%).
“I am not trying to justify or defend the performance of the capital market here, but just trying to highlight that Indian markets have not performed much worse, in fact, they have been better off than major developed economies and emerging markets,” Mr. Tyagi reiterated.
The SEBI chief said that the regulator has moved ‘in a timely manner’ ‘by government standards’ on implementing reforms in the corporate governance framework proposed by a committee headed by Uday Kotak.
Steps are afoot to enhance the focus on independent directors, prescribe the separation of CEO, MD and chairperson roles, enhance the role of audit, nomination and remuneration and risk management committees as well as strengthening disclosures of related-party transactions, he said.
While a record ₹8.8 lakh crore was raised from the debt and equity markets in 2017-18 compared with ₹7.7 lakh crore in 16-17, this year, about ₹4.85 lakh crore has been raised from the capital markets in this financial year so far, Mr. Tyagi said.
