Issuers need to bridge gap between demand and supply in securities, says SEBI's Ananth Narayan

There is a gap between the supply and demand of securities in the Indian market, and issuers need to step up to bridge the gap, suggested Ananth Narayan, a whole-time member of the Securities and Exchange Board of India (SEBI).

Since financial year 2021-22 (FY22) onwards, mutual funds, other domestic institutional investors (DIIs), and individuals net infused ₹3.1 lakh crore annually into the country's equity secondary markets, Narayan pointed out, while speaking at the 21st Annual Capital Market Conference on Friday, August 2.

This is nearly eight times higher as compared to around ₹40,000 crore infused each year into the second market between FY16 and FY21, the SEBI official added.

"The ₹3.1 lakh crore of net demand for paper brought in by MFs, DIIs and individuals into the secondary market every year over the past 3 years, far exceeds the roughly ₹2 lakh crore of annual primary market issuance spanning IPO, FPO, Preferential Allotment, QIP, Rights Issue, and even OFS," Narayan said.

'Asset price inflation'

"Prolonged mismatch of this nature can leave us with more of asset price inflation, rather than capital formation," the SEBI whole-time member warned.

Anecdotally, the prices of over 30% of mid-cap and small stocks have more than tripled over the last three years, he said.

"While there can be any number of arguments to justify prices, we need issuers –including many members of FICCI -to step up to the opportunity, raise risk capital from our willing investors, deploy it and create new businesses and household savings, and hence ensure that capital formation sustains as a virtuous cycle," he noted.

Narayan, during his address, also underlined the strong performance of the Indian market as compared to its global peers.

"Our markets have been amongst the best performing markets globally. Five years ago, India had around 9% weightage in the MSCI EM Index –that now stands at 19.2%," he said.