Are retail investments in domestic stock market safe? Rahul Gandhi asks, BJP responds

Are retail investments in the domestic stock market safe? Indian National Congress (INC) member Rahul Gandhi raised this question today, as he felt crony capitalism and a lack of transparency regarding the market regulator SEBI were harming retail investors. 

India is a $5.14 trillion stock market. Its share in global market capitalisation jumped to 4.3 per cent this month from the low of 1.6 per cent in 2013, making it the second highest among emerging markets. 

"India is among the top five capital markets in the world and, thus, the credibility of the capital market regulator is of immense importance," said journalist and author Sucheta Dalal. 

Dalal said when there are no disclosures, only retail investors suffer.  "SEBI has got away in the last 10-15 years because nobody knew enough about stock market and nobody asked questions. But that changed vastly after 2020," Dalal said.

Dalal said she is very concerned about such new investors to the market, as for them five years of experience is huge. In reality, Dalal said, it means nothing in the capital markets.

"Investors have not seen a single bear market, which can last for long. They would be like sitting ducks if something goes wrong. From two crore to 10 crore, eight crore people have entered the market for first time and have seen nothing but a bull run," Dalal said adding that India and the credibility of domestic stock market have been damaged. 

BJP's Amit Malviya in a post on X alleged Gandhi is indulging in fear-mongering about the markets, noting CLSA, Motilal Oswal, and a number of other brokerage firms are optimistic about the long-term India story and are extremely bullish on the Indian stock market. 

Even as Sensex and Nifty are off their record highs, they are up 7-8 per cent year-to-date. 

MOFSL in a strategy note suggested that India’s market capitalisation has now reached levels comparable to those of the US market in the early 1990s, China in 2014, Japan in 2015, and Hong Kong in 2017. It said India’s weight in the MSCI EM Index had briefly surpassed that of China in September, rising to 22 per cent from 7 per cent in 2014. 

India's financialisation, especially in the equity asset class, is being driven by macro stability, digitalisation, rising appetite for equity investing and strong earnings growth prospects, Morgan Stanley said in November 11 note. It noted equities account for 20 per cent of wealth creation over the past decade, but only about 3 per cent of annual savings.

In the 8.24 minute video, Rahul Gandhi insisted the lack of transparency regarding the SEBI was harming retail investors. He said the Public Accounts Committee (PAC) of Parliament has every right to call the Sebi Chair and listen to her in a neutral fashion. He was talking about the PAC summoning Madhabi Puri Buch earlier as a part performance review of regulatory bodies established by an Act of Parliament that she skipped. 

Dalal said: "I don't think any Sebi chairperson ever had the courage to say that s/he would not appear unless there is some passive signal -- don't worry, we will take care of it."   

Without naming anybody, she said it is perplexing to her why the entire credibility of the Indian capital market has been put of risk. "Why would you do it for one person? Why would you put the country's reputation, the capital market's reputation and the finance ministry's reputation behind just one person?," she asked. 

Dalal said it is does not look logical to her. 

To this, Gandhi asked why the government is insisting on to keep Buch in office. Should they not replace Sebi chief, he asked.

"Why not follow due process? The silence is not about the government, there is a central vigilance commission and she reports to them. Have you ever heard squeak out of them? They are supposed to react on this. Are they waiting for someone to complain or do they think they are not accountable to anybody or have role, no more?" Dalal replied.