Nearly two months after RBI Governor Shaktikanta Das’s comments that there is a ‘disconnect’ between the stock market and ‘real economy’, SEBI Chairman Ajay Tyagi said that the recent market recovery seems to be broad-based.
SEBI Chairman explained that the market recovery can be termed broad-based primarily on the basis of three factors.
Firstly, it is not just the large cap but also the mid and small cap indices which have recovered since the lows seen in March 2020. While the large cap and mid cap indices have increased around 55%, the small cap index has increased around 70%.
Secondly, while statistically the indices could go up because of certain stocks which have relatively higher weights, SEBI’s analysis shows that the recovery is not only in the heavyweight stocks, but across the board in the index. Around 40-50% of the constituents in each index category- large, mid and small cap- outperformed the respective indices this financial year.
Thirdly, the recovery is broad-based outside the indices as well- out of the stocks that have traded on NSE and BSE during this financial year, more than 93% of the stocks on NSE and more than 75% of the stocks on BSE have yielded positive returns in this financial year as on Sep 30, 2020.
Besides, the increased investor participation in markets is another factor. Tyagi said that on a broader level, the participation in the equity market is higher now “than ever before”.
The average daily turnover in the cash market in this financial year is around Rs. 60,000 crore, 54% higher than the figure of Rs. 39,000 crore last year. The equity derivatives segment has also seen the average daily turnover grow by around 27% as compared to the last year. In fact, the average daily turnover in both the cash market and equity derivatives hit their all-time high figures in the months of June and September 2020.
On the trend of increasing retail participation, Tyagi said that during April- September 2020, 63 lakh new demat accounts were added as compared to 27.4 lakh accounts during the corresponding period last year, i.e. an increase by around 130%.
Tyagi made these remarks at CII’s 11th Financial Markets Summit 2020.
