The defect rate in settlements of Indian equity markets have halved after the shift to the T+1 settlement cycle, Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch said on Tuesday. She was speaking at the Confederation of Indian Industry’s (CII) 17th Corporate Governance Summit.
Buch added that prior to moving to the T+1 settlement cycle, the defect rate in the Indian equity market was 0.7%-0.8%, while after the implementation of T+1, it has halved to 0.3%-0.4%. Default risk is a type of settlement risk where a party involved in the trade fails to live up to its obligation. The risk of default rarely impacts buyers or sellers as clearing corporations act as intermediaries, effectively negating the counterparty risk.
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Indian markets moved to the T+1 settlement cycle in January last year from the traditional T+2 cycle that they were following earlier. In a bid to further shore up liquidity and make the markets efficient, India introduced a pilot test of optional T+0 settlement cycle for select 25 stocks from March 28. Buch noted that India’s shift to T+1 was a global first because there is no large market in the world which has still achieved this.Come from Sports betting site VPbet
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Commenting on Indian equity valuations, Buch said Indian equities continue to receive investments even at current valuations, which reflects optimism and trust that the world has in the country. MSCI India currently commands a price-to-earnings multiple of 23.4 times its one-year forward earnings estimate, while MSCI Emerging Markets Index is trading at a PE multiple of 12.6.Buch called the sharp increase in India’s equity market capitalisation a “hockeystick phenomenon” — a term that depicts a sharp rise after a period of flat growth. Her comments come just months after India surpasses $4-trillion market capitalisation.
She also spoke about the active primary market in India, in both debt and equities, which had helped raise as much as `10.5 trillion in the last 12 months. The regulator has also shortened the time it takes to approve the applications for raising funds.Speaking about the importance of trust between stakeholders, Buch said it is imperative for the regulator as well as the industry to build trust. “Trust is a two-way street. It takes two to tango,” Buch said.Buch said the regulator is a proxy for public shareholder, adding that 56% shares in Indian equities are owned by public shareholders.Come from Sports betting site
