Low interest rates, ample liquidity in securities market reasons behind the rising investor interest: Sebi chief

Sebi Chairman Ajay Tyagi on Thursday declared that prevailing low interest rates and ample liquidity are major factors for rising investor interest and any tightening of liquidity or increase in interest rates would impact the market.

“Prevailing low interest rates and ample liquidity availability aren’t the only reasons for this increased investor interest in securities market in India. One cannot deny that they are major factors and any tightening of liquidity or increase in interest rates would impact the market,” the Securities and Exchange Board of India (Sebi) chief stated at the NISM capital market conference.

According to Tyagi, it also needs to be acknowledged that by their very nature, the markets are forward-looking and the present investments take into account future growth prospects. Add to this, the regulator’s effort in terms of continuous dialogue with stakeholders to bring in required regulatory changes, rationalising procedures and maintaining trust in the market, he added.

Tyagi mentioned about the cumulative number of total demat accounts rose from 41 million at the start of FY21 to 55 million by the end — an increase of 34.7 per cent. On an average, about 1.2 million new demat accounts were opened per month in FY21 as compared to 0.42 million per month in the preceding fiscal. “The trend gets further accentuated during the current financial year — on an average, 2.45 million demat accounts have been opened per month during April- June 2021,” he said. 

“Along with the robust growth, it is heartening to note that our markets are entering a new era with several new age tech companies preferring to list domestically. Our markets offer as attractive a fund-raising proposition as any overseas market,” Tyagi suggested. Recent filings and public offerings reflect the maturity of the market to accept the business model of new age tech companies, which aren’t amenable to valuation through conventional metrics of profitability. 

Successful IPOs of such companies are likely to attract more funds in domestic markets, thus creating a new ecosystem of entrepreneurs and investors. The Sebi chief also acknowledged that initial share-sales, REITs (real estate investment trusts) and InvITs (Infrastructure investment trusts), ESG (environment, social and governance) themed mutual fund schemes and exchange-traded funds (ETFs) have caught the fancy of retail investors.

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