Mumbai, India – Union Finance Minister Nirmala Sitharaman expressed concerns about the increasing number of Indians investing in the stock market and emphasized the importance of safeguarding their household savings. Speaking at a BSE event, Sitharaman highlighted the risks associated with growing retail participation in the derivatives market.
Sitharaman warned that unchecked growth in retail trading in futures and options could pose challenges for the market, investor sentiment, and households’ financial well-being. She cited a study by Sebi indicating that a significant percentage of individual traders in the equity F&O segment had incurred losses, with an average loss of Rs 1.1 lakh during FY22.
In response to these concerns, BSE announced measures to address sudden spikes in options prices and enhance surveillance efforts. Sitharaman urged BSE to collaborate closely with SEBI to uphold stringent compliance and regulatory standards, ensuring investor confidence remained intact and advocating for higher corporate governance standards among listed companies.
The finance minister noted the shift in household savings towards equities from traditional instruments and stressed the importance of market stability, risk mitigation, and technological advancements like blockchain, AI, and big data to enhance market efficiency.
Sitharaman highlighted the growing trend of families allocating savings to equities, spurred by factors such as Covid-19 and online KYC processes. This shift led to a significant increase in demat accounts, mutual fund assets, SIP contributions, and funds raised through IPOs over the past decade.
Acknowledging the increased trust and active participation of retail investors in the stock market, Sitharaman emphasized the role of retail money as a counterbalance to FPI flows. She also reassured investors about the stability and continuity of the next government under Prime Minister Modi.
Addressing recent market volatility and foreign investor selloffs, Sitharaman expressed confidence in the market’s resilience, noting that it operates based on its own assessment of global and domestic situations. She assured investors that there was no need to worry about the outcome of ongoing polls, emphasizing the market’s ability to navigate uncertainties independently.