Markets-economy disconnect: No precedent before, says Sebi chief


Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi on Thursday highlighted the risks that emanated from a growing disconnect between the markets and the economy. He said the disconnect witnessed in the financial markets and the economy had possibly never been seen before.

While speaking at the second Sebi-NISM Research Conference on Behaviour of Securities Markets – Sighting of a Black Swan, Tyagi said: “Typically, stock markets have been barometers of the economy and move in the direction the economy moves or is expected to move. However, after the onset of the pandemic, several institutions, including the Financial Stability Board and the RBI, have raised concerns of an increasing disconnect of the financial markets with the real economy and a possible risk it may pose to systemic stability.”

India has been seeing such unprecedented market movements like many global markets as measures were being taken to tackle the pandemic and its after effects.

The sharp swings in the market from the lows of March 2020 to the historic highs in January 2021 have also increased volatility in the market. The fall, recovery and the overall market movement between March and till date have been significant and unprecedented, he said. Tyagi explained that the functioning of corporates as well as their fund-raising changed during the pandemic.

The regulator said the focus on ESG had only increased further this year. In line with global trend, investors also showed increased interest in ESG investment. As a consequence of this, Sebi would soon announce relevant guidelines. The regulator stated that a defining trend of FY21 was the rise in direct participation of individual investors in the markets. —FE


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