BHUBANESWAR: India’s financial ecosystem is becoming increasingly resilient, driven by disciplined domestic investors, regulatory reforms and expanding participation from smaller cities and states, Securities and Exchange Board of India (Sebi) Chairman, Tuhin Kanta Pandey, said on Monday.
The West Asia crisis has undoubtedly created global economic uncertainty, he said. “The current crisis is difficult in terms of its global reach, particularly through oil. It has created both price and supply shocks, and all economies are feeling the impact. There are inflationary risks along with spillover and second-order effects on economic growth. But Indian markets have remained quite resilient,” he said.
Domestic investors have continued to support the market despite corrections and foreign institutional investor outflows since September 2024, he added.
The Sebi chief also highlighted concerns around artificial intelligence (AI) firm Anthropic’s Claude Mythos platform, saying it posed a “real risk”. “Mythos has not been released yet, but it has been given only to a few entities. There are similar other AI tools which claim they can identify vulnerabilities much faster than traditional tools. In the hands of bad actors, they could potentially exploit vulnerabilities much faster,” he said.
Pandey said Sebi has taken proactive measures and was among the first in the world to issue a formal advisory to market participants on AI-related cyber risks. “We have established accelerated patch management and incident response frameworks. A cybersuraksha.ai group has also been created to proactively identify and plug vulnerabilities so that our market ecosystem and intermediaries remain protected,” he said.
On algorithmic trading, he said it remains permissible but under strict governance standards. “Algos are allowed, but they cannot be disruptive. They must be simulated at exchanges before deployment, and investors must be informed if advisory services are algorithm-driven. Transparency and disclosures are important,” he said.
The Sebi chief projected that municipal bonds will become one of the biggest markets in the country in the next 15 to 20 years. He described them as one of the most important financing instruments for urban infrastructure globally.
Municipal bonds are used worldwide to raise trillions of dollars for urban development. Incentives provided under schemes such as AMRUT and recent Union Budget announcements are encouraging urban local bodies to access capital markets, he said.
Explaining the recent relative underperformance in Indian equities, Pandey said multiple factors such as earnings growth, currency movement, sectoral preferences of global investors and post-tax dollar returns influence foreign flows. “Every market has its own rising and falling cycles. Analysts are free to interpret the reasons, but fundamentals ultimately drive markets,” he said.
The Sebi chairman also affirmed a recent Morgan Stanley assessment that domestic investors are increasingly replacing foreign investors in Indian equities. “FPIs at one point held 22 to 24 per cent of listed equities, which has now come down to about 14 per cent. This has been substituted by domestic institutions. In many ways, it reflects the Indianisation of ownership and the strength of domestic capital,” he said.
Despite a challenging year globally, Pandey said India’s capital formation remained strong, with nearly ₹13 trillion raised through debt and equity markets last financial year alone.
“Even in a very difficult year, capital formation did not falter. We had 366 IPOs (initial public offerings) last year, while some advanced economies, including parts of Europe, did not see even a single IPO. That shows entrepreneurs are coming to the market, investors are participating, and the cycle of economic growth and market development remains intact,” he added.
Source: Business Standard
