Spike in equity market retail participation seen since lockdown: Sebi chief

To facilitate a smooth entry of these newcomers to the capital markets, Tyagi said it would be ideal that they begin their journey by first investing in risk-free government securities (G-Secs). To achieve this, he suggested that G-Secs should be issued in demat form.

Retail participation in the equity market has increased since the lockdown to contain the coronavirus pandemic began, Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi said on Wednesday. New Demat accounts have shot up as several participants were first-time investors, Tyagi said at FICCI event on capital markets.

"We have seen a huge surge in participation of retail investors in the equity market in the last few months," he stated. Many analysts have quoted the lack of other investment opportunities as one of the reasons for this phenomenon. To facilitate the smooth entry of these newcomers to the capital markets, Tyagi said it would be ideal that they begin their journey by first investing in risk-free government securities (G-Secs).

To achieve this, he suggested that G-Secs should be issued in Demat form. He, further, suggested that these new Demat account holders, after gaining experience investing in G-Secs, could then gradually add other securities to their Demat accounts. Tyagi noted that markets have largely recovered from the shock of March. Despite the pandemic, the market raised over Rs 2 lakh crore capital in the first quarter of 2020-21.

Tyagi also mentioned the challenges faced by corporates because of the unprecedented pandemic, adding that the COVID-19 situation has pushed many companies into stress and worsened it for already stressed companies and such firms are finding it difficult to raise funds from the market. Further, due to the suspension of Insolvency and Bankruptcy Code (IBC) provisions for six months, both the companies and the lenders are unable to utilize the IBC framework for resolution. To help such stressed companies to raise capital through a preferential allotment, Sebi has relaxed pricing methodology for such issues and exempted allottees from open offer obligations. These relaxed norms can be used for restructuring of stressed companies without going through the IBC process, he said. Further, it has come out with a number of relaxations to facilitate fundraising by the corporates during these times. These relaxations relate to the rights issue, follow-on offering, qualified institutional placements, creeping acquisition of shares by promoters, and easier pricing framework for allotment of shares through the preferential issue, he added.

According to him, many corporates have already used or are in the process of using these relaxations to raise funds to meet their requirements. "We are passing through difficult, stressful, and uncertain times. However, the challenges also bring along with them several opportunities. The revival of the stock market and an uptick in fundraising by the corporates is encouraging," he said.