Sebi on Friday said the regulator and stock exchanges are prepared to "take any action" as required to deal with market volatility, hours after trading was halted for 45 minutes.
Sebi on Friday said the regulator and stock exchanges are prepared to “take any action” as required to deal with market volatility, hours after trading was halted for 45 minutes. Over the last few days, the Indian stock market has been moving in tandem with other global markets due to concerns over coronavirus pandemic, resultant fear of economic slowdown and recent fall in global crude prices, among others, Sebi said in a statement.
“Sebi and stock exchanges are prepared to take suitable actions as may be required,” the regulator said. Further, it said the fall in the Indian indices has been significantly lower than the stock market in other countries.
It said Sebi and exchanges have a robust risk management framework in place, which automatically gets triggered in response to movements in the indices — BSE Sensex and NSE Nifty– as well as individual stocks (both in cash and derivatives market).
Equity benchmark Sensex plummeted over 3,200 points and the broader Nifty sank near 8,600 level, hitting their lower circuit limits, in opening session on Friday as coronavirus pandemic-led recession fears fuelled worldwide panic. Following this, stock exchanges halted trading for 45 minutes.
Later, the broader market recovered from the day’s low and the BSE Sensex and the NSE Nifty were trading over 4 per cent higher. On Thursday, Indian equity benchmarks suffered their biggest ever one-day plunge to crash into bear territory. After nosediving over 3,204.30 points, BSE Sensex finally closed 2,919.26 points or 8.18 per cent lower. Likewise, NSE Nifty slumped by 868.25 points or 8.30 per cent.
Giving a comparative market movement of global indices, Sebi said Indian equity markets have fallen over 19 per cent in February and March so far, while those in Russia, Brazil and France dived over 30 per cent each. The UK’s FTSE 100 index dropped by 28 per cent, the US’ Nasdaq plunged 21 per cent and Dow Jones by 25 per cent.
According to Sebi, measures like action on the basis of surveillance inputs, regular follow up by the clearing corporations with the clearing members for collection of margin and pay-in obligations, are also in place.
“The positions of margin payments, margin utilization, adequacy of collaterals (securities deposited by the brokers with the clearing corporations) and the pay-in’s obligations being met by the clearing members are being continuously monitored. Similarly, the settlement and clearance of trades are also being constantly monitored,” Sebi said.
Other measures to check market volatility are value at risk margin with initial margin to cover 99 per cent risk of a transaction, extreme loss margin to cover the residual risk of a transaction, collection of mark to market losses on daily basis, additional surveillance margins based on stress tests and circuit filters at index as well as stock levels, the regulator said.