Regulators must be a step ahead on digitisation: FM Nirmala Sitharaman

Says retail investors seemed to act as 'shock absorbers' amid volatility

Union Finance Minister Nirmala Sitharaman on Tuesday stressed the role of digitisation in fair and transparent business practices.

However, regulators have to be ahead of the curve in understanding digital methods to preclude the misuse of technology, she said.

“The Competition Commission of India (CCI), National Financial Reporting Authority (NFRA), and others have to be ahead of the curve to see where the regulations are falling into place, where they need a soft touch, and where they will have to be a deterrent and strong,” Sitharaman said.

Mentioning various institutions under the corporate affairs ministry, she said the CCI had made a major contribution by controlling mergers in a soft but significant way, giving consumers protection.

She noted mergers and acquisitions were taking place in the country in a big way.

Also, the minister said retail investors seemed to act as “shock absorbers” amid volatility in stock markets even when foreign portfolio investors (FPIs) were selling amid the tightening of monetary policy to rein in inflation, and geopolitical tensions.

“If FPIs and foreign institutional investors went away, our markets didn’t show ups and downs distinctively because small investors have come in a big way,” said Sitharaman, speaking at an event that was part of the Azadi ka Amrit Mahotsav, organised by the corporate affairs ministry.

On the occasion, the finance minister launched a special window facility for senior citizens above 75 years for seeking refund from the Investor Education and Protection Fund (IEPF) authority.

A surge in global commodity prices, monetary tightening plans, and stretched valuations are prompting foreign investors to exit Indian stock markets. They dumped Indian equities worth over Rs 39,000 crore last month amid rising bond yields in the US, and the prospects of more aggressive rate hikes by the Federal Reserve.

With this, the net outflow from equities stood at Rs 1.66 trillion so far in 2022.

On the other hand, strong inflows from domestic investors (both mutual funds as well as direct investing) have helped cushion the market fall. 

Small investors have continued to keep faith in equity investing even as stocks have come off sharply from their highs. 

In the past 12 months, an estimated Rs 4.5 trillion of retail inflows has entered the domestic equity market.

Besides, the minister talked of the government taking quick steps during the pandemic.

She launched the National CSR Exchange Portal, a digital initiative on corporate social responsibility (CSR) that will enable stakeholders to list, search, interact, engage, and manage their CSR projects on a voluntary basis.

Rajesh Verma, secretary, Ministry of Corporate Affairs, said the ministry would come up with various tools, including for compliance management, and emphasised the focus on technology-driven platforms to facilitate ease of doing business.