He noted that past disruptions such as the COVID-19 pandemic and the Russia-Ukraine war have shown that periods of extreme volatility are short-lived and markets eventually stabilize. Pandey advised investors, especially retail investors, to be patient during such phases. He added that the real test of financial markets is not the lack of volatility but their ability to function properly, fairly and efficiently despite uncertainty.
“…geopolitical tensions continue to affect economic relations. Conflicts in the Middle East have disrupted energy supplies and created instability in oil and gas markets around the world. Yet, when we look at similar events in the past, one lesson becomes clear: periods of great instability never last. Then Russia and Ukraine, which created market instability around the world – but eventually stabilized,” Pandey said in a dispute over money controls. He said during his speech at the meeting.
“The real test of a market is not whether volatility appears. The real test is whether the system continues to work properly, fairly and efficiently when it does. In uncertain times, the strength of the capital market does not occur in the absence of volatility. Volatility is a natural characteristic of the market. The real strength lies in the confidence that during fair operation, even a transparent system will work fairly. Stress,” Pandey added when he spoke on the topic ” Making Capital Markets More Effective in Uncertain Times”.
The fear index India VIX has risen 124% in the last three months and is now hovering around the 22.65 mark. On Friday, it surged more than 5% as markets witnessed a bloodbath. India’s benchmark indices fell sharply yesterday, recording their third consecutive decline as the Iran-Israel/US conflict continued to weigh on market sentiment. The biggest drags were metals, autos, and financial stocks.
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In a volatile session, the broader Nifty fell 488.05 points, or 2.06%, to close at 23,151.10, while the 30-share BSE Sensex shed 1470.50 points, or 1.93%, to settle at 74.9265.
Pandey highlighted the role of efficient capital markets, which he says play a stabilizing role in an uncertain world because they are able to transparently price-discover while absorbing shocks without destabilizing the broader financial system.
“And perhaps most importantly, they maintain investor confidence. Efficiency is the foundation of confidence in the financial system. Without that confidence,
The capital is forgotten. Investment slows down. And growth is becoming more difficult to sustain,” the Sebi chairman said.
The Sebi chairman also said that the global economy is currently characterized by uncertainty due to rapid technological changes such as AI.
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