How is the stock market regulated in India?

(GS-III: Indian economy and related issues)

In News:

The SC recently asked the SEBI and the government to produce the existing regulatory framework in place to protect investors from share market volatility.

Background:

This followed the Hindenburg Research report, which accused the Adani Group of stock market manipulation and accounting fraud.

A share/a stock market is a component of a free-market economy, where various kinds of stock shares/bonds/securities are traded.

It allows companies to raise money and investors to participate in the financial achievements of the companies, makes profits through capital gains, and earn income through dividends.

The securities market in India is regulated by four key laws:

The Companies Act, 2013: It regulates the incorporation of a company, responsibilities of a company, directors, and dissolution of a company.

The Securities and Exchange Board of India Act, 1992: It empowers SEBI to register intermediaries like stock brokers, merchant bankers, and portfolio managers, regulate their functioning, impose penalties including suspending/cancelling the registration

The Securities Contracts (Regulation) Act, 1956 (SCRA): It empowers SEBI to recognise (and derecognise) stock exchanges, prescribe rules and bye-laws for their functioning, and regulate trading, clearing and settlement on stock exchanges.

The Depositories Act, 1996: It introduced and legitimised the concept of dematerialised securities being held in an electronic form. SEBI set up the infrastructure for doing this by registering depositories and depository participants.

Can SEBI step in to curb market volatility?

While SEBI does not interfere to prevent market volatility, exchanges have circuit filters (upper and lower) to prevent excessive volatility.

But SEBI can issue directions to stock exchanges to stop trading, totally or selectively.

It can also prohibit entities or persons from buying, selling or dealing in securities, or from raising funds from the market.

What are the guidelines for fundraising?

The Companies Act has delegated the authority to enforce some of its provisions to SEBI, including the regulation of raising capital, corporate governance, resolution of investor grievances, etc.

As a result, SEBI issued guidelines such as the Issue of Capital and Disclosure Requirement Regulations, the Listing Obligations and Disclosure Requirements Regulations (2015), etc.

What are the safeguards against fraud?

Fraud undermines regulation and prevents a market from being fair and transparent.

SEBI notified the Prohibition of Fraudulent and Unfair Trade Practices Regulations (1995) and the Prohibition of Insider Trading Regulations (1992).

These regulations define different types of fraud, and provide for penalties and violation of these regulations is a presumed violation of the Prevention of Money Laundering Act.

SEBI has been given the powers of a civil court and using these powers, SEBI has acted against Satyam, Sahara India, Ketan Parekh and Vijay Mallya.

Appeals – SEBI order → Securities Appellate Tribunal (SAT) → SC.

With an eye on China, Union Cabinet clears seven ITBP battalions

(GS-III: Internal Security – Various Security forces and agencies and their mandate.)

In News:

With the Line of Actual Control remaining tense, India is raising seven new battalions of the famed patrol force ITBP, for ‘effective monitoring’ of the border region.

New Battalions:

The battalions are expected to be raised by 2025-26, increasing the strength of the ITBP from the current 88,000 to 97,000, making it the fourth largest CAPF.

The last time ITBP battalions were raised was in 2011.

About ITBP:

The Indo-Tibetan Border Police (ITBP) is a border patrol organization of India deployed along its borders with Tibet Autonomous Region.

It is one of the seven Central Armed Police Forces, established in 1962 in the aftermath of the Sino-Indian War of 1962.

The ITBP guards 3,488 km long India-China borders ranging from the Karakoram Pass in Ladakh to Jachep La in Arunachal Pradesh.

Apart from this, the Force also has important roles in many internal security duties and operations against Left Wing Extremism in the state of Chhattisgarh.

ITBP is a specialized Armed Police Force of the Nation, which trains its personnel in various disciplines including mountaineering and skiing apart from intensive tactical training.

ITBP also conducts relief and rescue operations as ‘First Responders’ for natural calamities in the Himalayan region.

Central Armed Police Force

The Ministry of Home Affairs maintains seven CAPFs:

The Central Reserve Police Force (CRPF), assists in internal security and counterinsurgency.

The Central Industrial Security Force (CISF), protects vital installations (like airports) and public sector undertakings.

The National Security Guards (NSG), is a special counterterrorism force.

Four border guarding forces, which are the Border Security Force (BSF), Indo-Tibetan Border Police (ITBP), Sashastra Seema Bal (SSB), and Assam Rifles (AR).

Chhatrapati Shivaji Maharaj Jayanti 2023

In News:

Shiv Jayanti also known as Chhatrapati Shivaji Maharaj Jayanti was observed recently. The day is celebrated with great zeal and fervour, especially in Maharashtra.

About Chhatrapati Shivaji Maharaj Jayanti:

Chhatrapati Shivaji Maharaj Jayanti marks the birth anniversary of the great Maratha emperor Chhatrapati Shivaji Maharaj. The main aim of the day is to honour the great warrior’s role in restoring the Maratha Empire and to celebrate his vast legacy

The celebration of Shiv Jayanti was set by Jyotirao Govindrao Phule, also known as Mahatma Jyotiba Phule, in 1870.

About Shivaji Maharaj:

Shivaji Maharaj was born in 1630 in Pune’s Shivneri Fort.

Corporate Debt Market

In News:

India is setting up a fund worth $4 billion to provide liquidity to its corporate debt market during bouts of stress, to help stem panic selling

Fund: 90% will be provided by the government and the rest by the asset manager

Administration: SBI Mutual Fund

What is the Debt market?

A debt market is a place where individuals, corporations, and governments can borrow money by selling debt securities like bonds to investors.

When a bond is issued, the borrower (the issuer) promises to pay a fixed interest rate and return the original amount borrowed (the principal) at a future date.

In the Corporate debt market, companies borrow money by issuing debt securities, such as bonds, to investors.

Importance of Corporate debt Market: Supplements the banking system for long-term capital investment and asset creation.

Challenges:

The size of the Indian corporate bond market ( about around $470 billion) is smaller than other major Asian emerging countries.

Crowding out by issuance of G-Secs (government securities)

Retail participation remains low and dominated by domestic institutions like insurance companies.