As Sensex PE hits 30, Tyagi cautions investors on liquidity-driven rally

Suresh P Iyengar Mumbai | Updated on September 16, 2021

Ajay Tyagi, Chairman, Securities and Exchange Board of India   -  BUSINESSLINE

Says peak margin is to protect retailer investors, price discovery in IPOs not transparent; regulator to allow AIFs to buy banks’ bad debts

Advising investors to be mindful of the risk they are getting into while investing in the stock market, Ajay Tyagi, Chairman, Securities and Exchange Board of India (SEBI) said there are a lot of headwinds and investors should be cautious particularly with the excess liquidity driving the market valuation and high inflation.

Speaking at the 12th CII Financial Market Summit on Thursday, Tyagi said the price earnings (PE) of Sensex is about 30 and investors should calculate the risk when low-interest rates are revised upwards or excess liquidity is drained slowly. He added that the initial public offering (IPO) market price discovery was not as transparent and efficient as secondary market.

Separate AIF category

The SEBI chief said that the regulator will soon carve out a separate category among Alternative Investment Funds (AIF) to buy into bad debt of banks and release much-needed capital for banks to boost lending.

The number of AIF registration has gone up by 19 to 700 and some of them have shown interest in taking over bad debt of banks.

SEBI is considering the request and will carve out a separate set of AIFs for this purpose and lay down the regulation soon, he said.

Alternative investment funds surge in FY21

On the issue of peak margin, Tyagi said it has been implemented to safeguard the retail investors’ interest as their participation in cash market has increased to 45 per cent from 33 per cent last year.

T+1 cycle

Investors should always use their money to take an intra-day position and brokers should not use someone’s money to fund risky bets of others, he added.

SEBI has received representation from Foreign Portfolio Investors on a shorter settlement cycle of trade plus one (T+1) and it is up to the exchanges to decide on which are the stocks that will be put into the new settlement cycle, he said.

Moreover, the T+3 settlement was revised to T+2 about 18 years back and there is a strong case for investors to get what they have paid for in the shortest period of time particularly with so much technological advancement and banking reforms, said Tyagi.

Responding to TV Narendran, President, CII, and Managing Director’s concern of the industry over the splitting of Chairman and Managing Director post, Tyagi said the decision was taken based on representation from the Kotak Committee which had a wide array of member and this is a globally accepted practice.

SEBI to usher in T+1 settlement cycle soon


Published on September 16, 2021

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