MUMBAI: Unchecked explosion in the riskier futures & options market by retail investors can create problems for their household finances, warned the outgoing finance minister Nirmala Sitharaman who also assured Dalal Street about the stability and majority of the next Modi government.
Discounting the recent volatility in market and the heavy selloff by foreign investors, the minister, while addressing business editors here Tuesday said, “I inherently believe that the stock market and its conduct is on its wisdom. It has its own assessment of the situations.. The market watches the global situations and other stock market situations very closely and behaves on its own wisdom. But all I can assure you and everyone out there is that there is absolutely no need for investors to worry about the outcome of the ongoing polls.”
“Absolutely, there is no doubt that prime minister Modi and BJP will return with good numbers. There is no need for the volatility index to fluctuate the way it has been doing in recent days. There is no need for VIX to fluctuate at all," she said.
“Unless you have predictable certainty, of course, I am not talking about certainty as a carved-in-stone certainty... The human nature is that, people prefer having a certain predictability, certain stability.."
It is significant to note that after the first phase of polling, the BJP, particularly Modi and Home Minister Amit Shah, have been silent on crossing the 400-mark, something the party went to town with in the run-up to the hustings.
As the polling progressed and each of the four phases saw voter apathy and resultant low voter turnout to the tune of 3-5 per cent on average, the markets especially foreign funds were getting jittery about Modi coming back with a much lower mandate. FPIs have sold off close to Rs 18,000 crore of equities this month alone.
“Any unchecked explosion retail trading in F&O segment can create future challenges not just for the markets but for investor sentiment as well as also for household finances,” Sitharaman later told, without elaborating, at an event at the BSE headquarters.
It can be noted that a recent study by the markets watchdog Sebi had found that as much as nine of the ten retail investors in the F&O markets have lost heavily.
Sitharaman also appealed to the BSE to work closely with Sebi to help build investor confidence by stringent compliances and robust regulatory standards, pointing out that both the BSE and NSE should mitigate systemic risks and ensure market stability.
Discounting the falling household savings rates, which hit a five year low in FY24, the minister said “household finances have made a generational shift and a good portion of that savings is coming into the stock market now, that shows their trust in the market. And we must safeguard them this is a trust we must protect."
“Our middle-class families today realise that even if it is risk-laden, there are better returns from the stock markets,” Sitharaman said underscoring the rapidly evolving dynamic of household savings.
"We must guard and build from strength to strength the trust that the investing public is showing in the stock market," the minister said, adding that the increasing flow of domestic savings into the stock markets has played an important role in becoming a counter-balancing force when FPIs come and go.
If this trend continues there may not be much fluctuation despite the whimsical FPI movements as the savings coming from small and retail investors prove to be a shock absorber in the markets, she said.
"The mindset that household savings have to be small savings in post offices and banks alone has not gone away from the minds of the Opposition parties. But the fact is that the nation has moved far away, far ahead and fast forward,” the minister said.
When pointed out that many analysts say most of the plus points of the country and thus the growth metrics are independent of the government of the day, she said “this is absolutely total nonsense… For growth to be stronger and stable yes, it does require a Modi and it does require the BJP.”
On the wealth tax plan a congressman had suggested and was latched onto by Modi and other BJP leaders, she said, “It simply means people who have through their hard work earned some wealth and saved it are now going to be ripped off of it... So that the rich can be made poor and the distribution can happen to the poor.. But the poor, with that distribution alone, cannot be made rich."
“So they are saying, I will make the rich poorer but I will only be able to do some distribution of wealth to make the poor richer. Thereby, I will leave the economy a lot poorer than what it was before.. This is a very ham-handed economics and does not work at all particularly for a nation like ours which strongly believes in small micro medium units and entrepreneurship,” the minister said.