 "FM Nirmala Sitharaman | Photo: PTI")
Financial markets prefer stability and predictability when it comes to taxation and policies, Union Finance Minister (FM) Nirmala Sitharaman said on Tuesday while interacting with the media on the sidelines of a BSE event.
“I inherently believe that stock market conduct is based on its own wisdom. It has its assessment of the situations globally and in other markets. There is absolutely no doubt that Prime Minister Narendra Modi and the Bharatiya Janata Party (BJP) will come back with good numbers. So the (concerns) around stability due to which the volatility is fluctuating, there is no need for that,” said Sitharaman.
The India Vix index, known as the fear gauge, has almost doubled in the past 14 trading sessions amid concerns over the Modi government’s victory margin. The index spikes when traders expect markets to see sharp swings over the next 30-day period.
Later, addressing an event at BSE, Sitharaman said an unchecked explosion in retail trading in the futures and options (F&O) segment could create challenges not just for the markets but also for investor sentiment and household finances.
The FM, however, urged stakeholders to engage in proactive consultation before tweaking any regulations.
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According to sources, India’s financial regulators are planning to set up an expert committee to assess the stability and risks that growing dominance of derivatives markets could pose. In the past, Sebi had been warning market participants on how the odds of winning are stacked up against small traders in the F&O segment.
The FM urged exchanges to work closely with the Securities and Exchange Board of India (Sebi) to boost investor confidence through stringent compliance and robust regulatory standards.
“Even after framing something, financial regulators should be ready for further tweaking based on the inputs from people on the ground. Nothing is cast in stone. Regulators will have to be proactively engaging with the stakeholders,” said Sitharaman.
The FM lauded the deepening of equity markets and said domestic investors have become a counterbalancing force to unpredictable foreign portfolio investor flow. The minister said the efficient adoption of technology has ensured that India ranks among the best.
“Many of the Western markets are happy with T+2, but now that T+0 has come in, many don’t even have the capacity to absorb it yet, and they are not hesitant to admit it. The level of technological efficiency you have come forward to offer has brought in trust in the Indian markets,” she said.
Sitharaman refused to answer questions about whether there would be tweaks to the capital market-related taxes. She said she won’t be able to comment on the issue until the election results and the Union Budget.
When asked about expanding the Sebi and the Securities Appellate Tribunal, the finance minister said it was a “good suggestion”.
About the challenges and opportunities associated with India’s inclusion in the global indexes, the FM said more key reforms would be needed. “The challenges will be that we sustain the momentum of reforms, opening up the economy, policy clarity, and simplification of compliances,” said Sitharaman.
The FM said the new government plans to undertake over 100 new policy reforms after taking office. On land reforms, she said it would have to go through a process of consultation with the states.
