11

Jul

SEBI's responsibility increases as Sensex surges

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Prof. Lallan Prasad

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New Delhi, 11 July 2024

The BSE Sensex crossed 80,000 for the first time last week; it took only 57 days to gain 5,000 points. This is the third time since the Sensex started in 1990 that such a big gain has been witnessed which has created an atmosphere of jubilation among the shareholders and is being called a big responsibility for SEBI.

This year, the Sensex has gained 10% so far and the market cap of 29 companies has gone above Rs 1 lakh crore. There are now 101 companies in the country with a market cap of more than Rs 1 lakh crore. In 2023 their number was 74. Regarding such a huge rise in the Sensex, Chief Justice Hon'ble Chandrachud has said that such incidents emphasize the need for regulatory authorities to ensure that everyone maintains their balance and patience amidst the celebration of victory. Market regulators - SEBI (Securities and Exchange Board of India) and SAT (Securities Appellate Tribunal) need to be vigilant so that the stability of their foundation can be ensured.

Due to the huge increase in transactions in the share market in the last few years, the workload of both SEBI and SAT has increased as well as their responsibilities. He also stressed the need to open more new benches for SAT. A stable and reliable environment for investment is a matter of national importance. When investors feel assured that their investment is protected by law and there is an effective mechanism for the resolution of disputes, there is a greater possibility of investment in the capital market which is being seen at present.

 

SEBI is an autonomous statutory body established on 12th April 1992 under the provisions of the Securities and Exchange Board of India Act 1992 with statutory powers - the same as those vested in a civil court. SEBI serves three categories of needs: 1) To provide a market in which investors can grow their wealth, 2) To ensure accurate and correct information about the market, and 3) To enable competition and a professional market for intermediaries. The market is full of criminals and hence strict action and serious intervention are required. The statutory enforcement powers given to SEBI are even higher than those in countries like the US and the UK so the provision of punishment for economic damage is effective.

SAT is also a statutory body established under the Securities and Exchange Board of India Act 1992 to hear and dispose of appeals against the orders passed by SEBI. Appeals can also be made to SAT against the orders of the Insurance Regulatory and Development Authority of India and the Pension Fund Regulatory and Development Authority. Since 1997, SAT has given its decisions on 67,000 appeals, with 1028 appeals still pending.

 

Article at a Glance
The BSE Sensex reached a new high of 80,000 last week, gaining 5000 points in just 57 days. This rapid growth has been seen as a big responsibility for SEBI, the securities and exchange regulator. The market is currently seeing a lot of activity, with 101 companies having a market cap of over Rs 1 lakh crore, up from 74 in 2023.

 However, this growth has also led to an increased workload for SEBI and SAT, the appellate tribunal for securities. Chief Justice Hon'ble Chandrachud has emphasized the need for regulatory authorities to maintain balance and patience during this time.

SEBI, an autonomous statutory body, is responsible for providing a market for investors, ensuring accurate information, and enabling competition among intermediaries. It has statutory powers similar to those of a civil court. SAT, also a statutory body, hears and disposes of appeals against orders passed by SEBI.

Fluctuations in the stock market are common and can be influenced by a variety of factors, including political and economic conditions, government policies, and global events. SEBI has no control over these factors, but it does play a role in controlling manipulations by big investors and middlemen.

The stock market can be unpredictable, and investors can lose money if they act impulsively or fall for scams. It is the responsibility of market regulators like SEBI and SAT to maintain a stable and reliable environment for investment and to protect investors from fraud.
 

 

Fluctuations in the stock market are a common phenomenon that keeps on happening. Sometimes the rise or fall is very sharp which attracts investors or drowns their capital. There are many reasons for this - the political and economic situation of the country, the economic and financial policies of the government and the central bank, capital and profits invested in companies, GDP, inflation, interest rates, unemployment, global economy, steps taken by the central banks of developed countries, war, disruption in the supply chain, anarchy, etc. all affect the stock market. SEBI has no control over these. When manipulations by big investors and middlemen affect the stock market, the role of SEBI becomes important.

Nowadays there is a constant bombardment of information including stock tips on social media, WhatsApp groups, and business news channels. Simple investors sometimes get trapped in this dangerous trap and lose their hard-earned money. A large number of investors remain at a loss in the stock market. Tactics like getting people to invest in penny stocks, getting them involved in intra-trade and short-term trading, making decisions in haste, and spreading rumours are adopted by middlemen, which need to be controlled. The impatience of shareholders also proves costly for them, heavy selling without thinking in a falling market is an example of this. Sometimes the market rises again in a very short time, in such a situation the shareholder can do nothing but regret his decision.

The stock market fell rapidly with the onset of the Corona epidemic but started touching new heights again after 11 months. Those who made heavy purchases in the falling market later saw a great increase in their capital, and those who sold in a hurry remained at a loss. The world's greatest investor Warren Buffet says that the stock market is a tool to transfer money from impatient to patient. From time to time news of big scams in the stock market comes.

 

The total market cap of the Indian stock market is close to $3.2 trillion. Where so much money flows from one person to another every day, greed, scams and frauds always occur. Harshad Mehta, Ketan Parikh, Satyam, etc. scams have duped investors on a large scale. Vigilance and intervention of market regulators - SEBI, SAT, etc. can bring such situations under control to some extent.

SEBI has been making efforts to ensure that correct news about the stock market reaches investors and that middlemen do not mislead investors, yet there is a need to be more vigilant. Necessary steps should be taken to ensure that appeals are resolved by SAT in less time, the number of benches of SAT should be increased and it should be made more capable.

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