The Securities and Exchange Board of India (SEBI)’s board will hold its meeting today. The board will likely take up a host of measures, including tighter norms for Futures & Options (F&O) trading, the introduction of ‘New Asset Class’ and mutual fund lite regulations. Ahead of the SEBI’s board meeting, the benchmark indices, the Sensex and the Nifty, have fallen by over 1 per cent each in anticipation to some of these measures.
The SEBI board is expected to clear the proposals to introduce ‘New Asset Class’, mutual fund lite regulations and launch of a product which would be a combination of rights issue and preferential allotment of shares.
In July, the SEBI proposed to introduce a ‘New Asset Class’ which would offer investment products between mutual funds and portfolio management services (PMS). The new category of products, to be introduced under the mutual fund structure, will have a minimum investment limit of Rs 10 lakh.
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The markets regulator had also floated a consultation paper to introduce Mutual Fund (MF) Lite regulations for passively managed mutual fund schemes. This relaxed regulatory framework for passive MF schemes is aimed at reducing compliance requirements, increasing penetration, facilitating investment diversification and fostering innovation.
One of the crucial reforms which the board may announce is tighter regulations for Futures & Options (F&O) trading, which has been a concern area for the government and other regulators. In order to curb speculative trading in the Futures & Options (F&O) segment, the SEBI, in July this year, proposed a series of short-term measures, including restricting multiple option contract expires, raising the size of options contracts and intraday monitoring of position limits.
The markets regulator has already received nearly 6,000 responses on the consultation paper on measures to strengthen the index derivatives framework, the SEBI Chairperson said last month.
Other crucial areas to be taken up by SEBI board
Today’s SEBI board meeting assumes importance as it is the first board meeting since the Hindenburg Research and Congress’ recent allegations of ‘conflict of interest’ against its chairperson Madhabi Puri Buch and her husband Dhaval Buch. The board will also take cognizance of these issues.
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In August, US-based Hindenburg Research alleged that the SEBI Chairperson Madhabi Puri Buch and her husband had stakes in obscure offshore funds used in “the Adani money siphoning scandal”. The short-seller claimed that the couple invested in Global Dynamic Opportunities Fund (GDOF), in which Vinod Adani, brother of Gautam Adani, had invested.
The Buchs have denied any wrongdoing.
Last month, the main opposition party the Congress also levelled a series of allegations of conflict of interest against the SEBI Chairperson. The Congress had alleged that SEBI Chairperson continued to draw salary from ICICI since 2017, when she joined SEBI as a whole-time member (WTM), and then took over at the helm of the market regulator.
The Congress also claimed that between 2018-2024 Madhabi Puri Buch, as a whole time member and later as the chairperson of SEBI, received rental income amounting to Rs 2.16 crore from Carol Info Services Ltd, a firm affiliated to Wockhardt Ltd.The SEBI Chairperson had dubbed the various allegations of the Congress party levelled against her as “false, incorrect, malicious and motivated”.
An important area that the SEBI Board is likely to take up is the recent concerns raised by the regulators’ officers on issues around unprofessional work culture and house rent allowance (HRA).
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Also Read | Sebi chairperson, husband call Congress allegations ‘false, malicious and motivated’
In August this year, nearly 500 Grade A SEBI officials complained to the government about a “hostile work environment” at the regulator. On September 5, SEBI issued a press release denying allegations of toxic work culture and said that its junior officers were being misguided by ‘external elements’.
However, after pressure from its officials, SEBI later withdrew the contentious press release. The regulator said that all the issues of employees would be resolved amicably.
How much have Sensex and Nifty fallen?
Ahead of the crucial SEBI board, markets barometer, the Sensex and the Nifty, have plunged to more than 1 per cent each in the early morning trades.
The 30-share BSE Sensex fell 1,007.69 points, or 1.2 per cent, to touch a low of 84,547.73 in the intraday trades. The Nifty 50 plunged 283 points, or 1.08 per cent, to an intraday low of 25,895.4. The 50-share index opened at 26,061.30, compared to the previous close of 26,178.95
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Analysts said the fall in benchmark indices is due to the expectation that the SEBI, in its board meeting today, will tighten the F&O trading regulations.
“Market is likely to move into a consolidation phase in the near-term. One significant factor that is influencing foreign portfolios is the outperformance of the Chinese stocks which is reflected in the massive surge in the Hang Seng index by around 18 per cent in September,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
This surge has been triggered by hopes of revival in the Chinese economy in response to the monetary and fiscal stimulus announced by the Chinese authorities. The cheap valuations of Chinese stocks are keeping the momentum intact.
“This means FIIs may continue to sell in India and move some more money to better performing markets,” he said.
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However, FII selling is unlikely to impact the Indian market significantly since the massive domestic money can easily absorb whatever the FIIs are selling, Vijaykumar said.
