SEBI statement on market movement

Last updated: 16 March 2020

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The Securities and Exchange Board of India (SEBI) has issued a statement regarding recent fluctuations in the Indian stock market. These movements are in line with global markets, influenced by concerns over the COVID-19 pandemic, potential economic slowdown, and falling crude oil prices. SEBI highlights that the fall in Indian indices has been less severe compared to many other global markets. The statement also assures that SEBI and stock exchanges have robust risk management frameworks in place, including measures like Value at Risk (VaR) margins, Extreme Loss Margins (ELM), and circuit filters, to manage market volatility.

Securities and Exchange Board of India

SEBI statement on market movement

Over the last few days the Indian Stock Market has been moving in tandem with other global markets owing to concerns relating to COVID-19 pandemic, resultant fear of economic slowdown, recent fall in global crude prices, etc. As can be seen from the following table giving a comparative market movement of global indices, it indicates that the fall in the Indian indices has been significantly lower than the stock market in other countries. Movement of major global indices are tabulated below:

Region	Index	Closing Index Value as on 12/03/2020	Closing Index Value as on 31/01/2020	% Change
Russia	RTS	966.40	1,517.07	-36.30%
Brazil	BOVESPA	72,583.00	113,760.60	-36.20%
France	CAC	4,044.26	5,806.34	-30.35%
Germany	DAX	9,161.13	12,981.97	-29.43%
Argentina	MERVAL	28,351.89	40,105.04	-29.31%
United Kingdom	FTSE 100	5,237.50	7,286.01	-28.12%
United States	DJIA	21,200.62	28,256.03	-24.97%
United States	NASDAQ	7,201.80	9,150.94	-21.30%
Japan	Nikkei	18,559.63	23,205.18	-20.02%
India	Nifty 50	9,590.15	11,962.10	-19.83%
India	Sensex 30	32,778.14	40,723.49	-19.51%
Singapore	Strait Times	2,678.64	3,153.73	-15.06%
South Korea	KOSPI	1,834.33	2,119.01	-13.43%
Taiwan	TAIEX	10,422.32	11,495.10	-9.33%
Hong Kong	Hang Seng	24,309.07	26,312.63	-7.61%
China	Shanghai Composite	2,923.49	2,976.53	-1.78%

SEBI and Stock Exchanges have a robust risk management framework in place which automatically gets triggered in response to movements in the indices (BSE Sensex and NSE Nifty) as well as individual stocks both in cash and derivatives market. Some of these measures include:

Value at Risk (VaR) Margin with initial margin to cover 99% risk of a transaction
Extreme Loss Margin (ELM) to cover the residual risk of a transaction
Collection of mark to market losses on daily basis
Additional surveillance margins based on stress tests
Circuit filters at index levels
Circuit filters at stock levels
Action on the basis of surveillance inputs
Regular follow up by the clearing corporations with the clearing members for collection of margin and pay-in obligations.

The positions of margin payments, margin utilization, adequacy of collaterals (securities deposited by the brokers with the clearing corporations) and the pay-in’s obligations being met by the clearing members (brokers) are being continuously monitored. Similarly, the settlement and clearance of trades are also being constantly monitored.

SEBI and Stock Exchanges are prepared to take suitable actions as may be required.

Mumbai

FAQ :

The Indian stock market has been moving in tandem with global markets due to concerns surrounding the COVID-19 pandemic, the fear of an economic slowdown, and the recent fall in global crude prices.

The statement indicates that the fall in Indian indices has been significantly lower than the stock market declines observed in many other countries.

SEBI and stock exchanges have a robust risk management framework, including Value at Risk (VaR) Margin, Extreme Loss Margin (ELM), additional surveillance margins, and circuit filters at both index and stock levels.

Clearing corporations continuously monitor the positions of margin payments, margin utilization, adequacy of collaterals, and pay-in obligations being met by clearing members (brokers).

Yes, SEBI and the stock exchanges are prepared to take suitable actions as may be required to manage market conditions.