People stand in front of the Reserve Bank of India logo at the Global FinTech Festival in Mumbai, India, on September 5, 2023.
Niharika Kulkarni Noor Photo | Getty Images
This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see?You can subscribe here.
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Bureaucrats are often considered too slow to move, which is a stereotype but perhaps unfair. Instead, this month many regulators across India’s financial system have taken a series of actions.
As the South Asian country’s financial markets develop and expand, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have been proactive in implementing new rules.
They said this was to ensure the stability and integrity of the market.
One area that caught their attention was the rapidly growing market for derivatives, specifically futures and options trading.
By 2023, more than three-quarters of the 108 billion options contracts traded globally will be on Indian exchanges, according to the Futures Industry Association. The huge growth over the past five years has been driven largely by retail investors, and its growth has attracted the attention of senior politicians.
Finance Minister Nirmala Sitharaman told an industry conference this week: “Any uncontrolled explosion in retail trading of futures and options may pose challenges in the future, not only for the market. , and also poses challenges to investor sentiment and household finances.
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However, SEBI late last month asked exchanges to pay higher regulatory fees, a move that caused the Bombay Stock Exchange’s share price to fall nearly 20% in the following trading day.
Likewise, regulators have banned 80% of trading activities in the currency futures market to smooth out volatility in the Indian rupee.
Another area of concern for regulators is the IPO market for small and medium-sized enterprises.
To protect minority shareholders and prevent abuse of the listing platform launched in 2012, SEBI is now considering raising the minimum size of such public offerings so that it would be limited to “serious companies”, Reuters reported this week.
Although regulations continue to be introduced, some of these new rules are still welcomed by investors.
For example, the central bank recommended that lenders retroactively set aside higher loan loss provisions for infrastructure projects.
This spooked bank investors and India’s Nifty PSU Bank Index immediately fell by more than 3%.
“The Reserve Bank of India has been tightening policy,” Rajeev Agrawal, hedge fund manager and managing partner of DoorDarshi India Fund, told CNBC’s Inside India.
Investors believe intervention in such circumstances is justified because regulators may be concerned that credit is growing too fast and could lead to “bubbles” in asset prices.
The central bank’s move comes in light of the massive defaults on infrastructure loans that began in 2012 and 2013, which strained the country’s banking system.
“I think it’s perfect because it makes the system secure,” Agrawal added.
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India is “very favorable” for IPOs. Shailendra Singh, managing director of Peak XV Partners (formerly Sequoia Capital India and Southeast Asia), told CNBC that India has created “India had 220 IPO transactions last year, a 48% increase from 2022, making it the world’s second largest IPO market.
India remains heavily dependent on coal. According to the latest report from energy think tank Ember, 78% of India’s electricity comes from fossil fuels, of which coal accounts for 75%. The country’s leaders have been optimistic about its path to net-zero emissions, boldly claiming that 50% of its electricity generation will come from non-fossil fuel forms by 2030.
The influence between the Maldives and India benefits Sri Lanka. Sri Lanka’s tourism minister says January’s social media spat, which led to a sharp drop in Indian tourists to the Maldives this year, has “definitely” helped Sri Lanka’s tourism industry. Nearly 34,400 Indian tourists visited Sri Lanka in January, more than double the 13,759 in January last year.
India’s mid-cap stocks are in a “bubble”. (Subscriber Content) On CNBC Pro, the portfolio manager behind a $3.1 billion Asia ex-Japan fund revealed they have all but exited the country. The fund manager said the current share price could not be justified even taking into account “aggressive assumptions” about future growth.
What happened to the market?
Indian stocks partially rebounded this week after falling 2% last week.this nifty 50 It is up 1.5% so far this week. The index has gained 3% this year.
India’s 10-year government bond yield fell to 7.08% last week. The Indian rupee has been almost flat against the US dollar over the past week.
What happens next week?
Elections will continue next week, with the fifth phase starting on Monday. Voting will be held in phases until June 1, with counting starting a few days later.
Next week, Go Digit Insurance, which lists former India cricket captain Virat Kohli as an early investor, is set to go public on Thursday.
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