Sebi mulls making ‘market risk factor disclosures’ to help investors

NEW DELHI: In a global first, Securities Trading Department of India (Sebi) is planning a regular release’risk coefficient disclosure‘ above market trends, including bullish and bearish, to help the investors make the right decisions by learning from the regulator’s insights, the sources said. This move, which is currently still in the preliminary discussions, could help investors avoid the herd mentality that has particularly been witnessed over the past few years – which began with a large-scale sell-off when Pandemic hit the world in early 2020, followed shortly by a spike in stock buying without a clear understanding of the fundamentals and largely due to the get-rich-quick story and then the subsequent loss.
Of particular importance are the losses experienced by investors in a large number of IPOs in the recent past and in the highly complex futures and options segment of the capital markets.
“Although investors have seen a fixed pattern play out in each cycle – that is, everyone rushes to buy stocks when the situation is good and then they panic sell when the crisis hits. The basics of investing in capital markets are always being thrown out the window and a major reason for that is the lack of truly independent insights,” a top official said.
The official added that most of the research papers available in the market have been prepared by market participants who have their own business interests in mind and, therefore, have It can be a great idea if the regulator itself publishes its insights from up or down trends in the market.
Explaining the idea Sebi is working on, a senior source said, “It’s time for Sebi to take the lead by disclosing on issues that could have implications for investors at scale and reveal key data points across the market.”
“The simple sentence required under current regulations that ‘certain investments are subject to market risk’ has become so cliché and it sounds like a motherhood statement that doesn’t work anymore. What is needed at the moment is for investors to get some detailed data sets, that also from the regulator and not just from their asset managers, whose primary target is is still maximizing their business,” said the source involved in the proposed move.
“We are not a nanny state where a regulator can dictate terms to market participants, including investors, on what to do and what not to do. do, but it is certainly the responsibility of the regulator to ensure that all necessary disclosures are made and to inform how market participants should make such disclosures.
“But as we require others to make all the necessary disclosures, it is also the duty of the regulator to disclose to investors and all market participants what they have known. learned and understood,” the source added.
Sebi already has a lot of facts and figures and huge datasets, thanks to the use of big data, artificial intelligence and other aspects of the latest technology, all of which can be of great help. much to investors and other market participants if Sebi itself begins to make regular disclosures of its learnings.
“It’s been said that understanding the future can be really easy if we analyze the past and present well. Information is passed on to investors in the form of risk factor disclosure, investors. can greatly benefit its investment decisions,” said a senior government official.
Currently, regulations require all listed companies, as well as some market participants and market infrastructure organizations, to disclose information about their decisions, policies, and practices. their future strategies to help investors make the right investment decisions.
However, there is no such requirement for the regulator itself and it is time for Sebi itself to take the lead as it is the only entity with a complete overview of the entire market, the official added. .
“It’s not just saying that the regulator is best placed when it comes to data sets and disclosures that can be most trusted and market-wide in nature. At a later stage, Sebi could also ask regulators brokers, exchanges, and other institutions that handle investors to take risks across the market coefficient disclosure that investors can rely on,” an unnamed source continued the discussions.
The idea, the source added, is to regularly release fact-based information – be it annually, semi-annually or quarterly.
While the details are still being finalized, these disclosures may also focus on investor behavior over a period of time, the profits they make or the losses they incur. bearers, profitable or losing market segments, areas of interest etc
“We have the advantage of big data that helps us understand what has worked for the market and what has gone bad. There’s no point in keeping all of that completely invisible to companies. investors. a right to know what the regulator’s knowledge is from a good or bad market, from a scam or from dealing with scammers,” the source added.
The Indian stock market has seen massive volatility in recent months, largely due to sudden foreign capital outflows and a delayed economic recovery in most key sectors. despite the recent two stock markets trending relatively stronger despite the COVID-19 pandemic.
Overall capital market mobilization for 2020-21 remains strong at over Rs 10 lakh crore, beating the previous year’s Rs 9.96 lakh crore, although businesses in general were affected. affected by the pandemic.
A unique highlight is the unprecedented increase in the participation of individual investors in the stock market, including through mutual funds.
The past two years have also seen further strengthening of corporate governance standards and disclosure requirements for listed companies, including enhancing the role and applicability of the governing committee. risk management, expanded dividend distribution policy mandates, and more.

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