Stock market valuations and Sebi

Contrary to conventional wisdom, regulatory interventions related to stock market valuations are not always undesirable. It is time to reconsider the mandate for Sebi

It’s better to be vaguely right than exactly wrong — Carveth Read

Small capitalisation (cap) and mid-cap stocks have appreciated by more than 60 per cent over the last year in India. Is this a bubble? If yes, what can the Securities and Exchange Board of India (Sebi) do, given its mandate? Relatedly, what should be its mandate?

While a stock price index is quite unpredictable, the same is, by and large, not quite true as far as the aggregate valuations are concerned. Valuation indicators such as price-to-earnings ratio (P/E), price-to-book ratio, dividend yield, ratio of market cap of small caps to