SEBI diktats cause unease in markets, brokers petition Finance Ministry

New Delhi: The Finance Ministry may soon have a decision to make, whether to encourage retail investors participation in the stock market through direct trading or to discourage them as seems to be the case with recent diktats on margins and intraday trading by the regulator, Securities and Exchange Board of India (SEBI) which have introduced a sense of unease among the broking community and retail investors.

The SEBI circulars coincide with an important new trend in the form of an unplanned and sudden entry of millions of new retail investors in the stock markets during the lockdown and Covid 19 phase. Many of them have either become unemployed or have reduced income and have started home while they were sitting at home during the lockdown and normal economic activity was curtailed.

The circulars come at the fag end of the extension given to SEBI Chairman Ajay Tyagi. He got a six month extension in his tenure which was to end on March 1. It is not known whether he will get a further extension after August. The Indian Administrative Service (IAS) officer of Himachal Pradesh cadre has served a three-year tenure following which another six months extension was given by the government.

Financial market is the only sector that has been able to function since the lockdown began in India and provided numerous opportunities to regular people facing job losses survive in these difficult times,” said Sahil Balani, Head- Research & Derivatives, Triventure Advisory Pvt Ltd. It is also estimated that the new circular will have a great impact on the derivatives markets as it will suck out the liquidity from the system, volumes will dry up to a great extent and will impact the livelihood of many retail traders.

“Instead of enforcing a ban on intraday leverage, it should be left to the brokers discretion with minimum controls at place. Penalty cannot be the way of doing business in a country like India where there is so less participation in capital markets,” said Balani.

The Securities and Exchange Board of India (SEBI) released its latest circular on July 20, 2020, aimed at banning the intraday leverage in a phased manner by December 1, 2020. According to the circular, traders and investors will now have to maintain upfront margin in their account to receive leverage from brokers.

Brokers say that with the country suffering from pandemic and the fate of making a livelihood is at stake, many people have recently gathered hope from intraday trading and implementation of this circular will make it difficult for the whole trading community to explore any such opportunity. During this pandemic, many individuals including housewives are turning towards intraday trading for their livelihoods.

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