SEBI Chief Raises Alarm on Stock Market Bubble; Investors Take Notice

The recent measures taken against Non-Banking Financial Companies (NBFCs), the Enforcement Directorate's continuous inquiry into the potential channeling of proceeds from the Mahadev betting case into the smallcap and SME segments significantly contributed to the market downturn on Monday. Notably, stocks such as Suzlon, NCC, Tata Investment Corp, HFCL, and IIFL Finance were the primary contributors to the decline in the smallcap index. Sebi chairperson Madhabi Puri Buch also suggested the possibility of mutual funds should also make a unified policy to safeguard investors from the risks associated with market bubbles.

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Mfs Should Formulate the Policy: Why?

In an every Mutual funds, have a trustee who constantly monitors the interest of investors; Buch suggests they should formulate the policy. If each fund decides to have its policy on how to manage this risk, they have no problem with it. Buch further said that “We are okay if the industry wants to make a common policy... Our objective is that trustees are responsible for protecting the investors.” And they have little less plan to do anything for unless have suitable public consultaion.

Sebi Will Make Available a Disclosure

Buch mentioned that by March 15, Sebi plans to release a disclosure format concerning stress testing for small- and mid-cap funds. This initiative aims to provide investors with valuable information about the number of days these funds would require to liquidate their underlying portfolios in the event of unfavorable market conditions.

Furthermore SEBI also wants small and medium enterprises (SMEs) preparing to go public to disclose risk factors in greater detail to potential investors, she expressed concerns about instances of price manipulation in some SME IPOs.

Sebi Wants SMEs to Prepare Public Disclosure

The regulatory body also emphasizes that small and medium enterprises (SMEs) intending to go public should provide more comprehensive details about risk factors to potential investors. Buch expressed the need for enhanced disclosure regarding risk factors, emphasizing the unique nature of the SME segment compared to the mainboard. He highlighted the differences in regulations, disclosures, and consequently, the nature of risks involved. Buch expressed concerns about instances of price manipulation observed in certain SME IPOs.

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