According to Zerodha’s CEO, Nithin Kamath, the rules changed by the Securities and Exchange Board of India (SEBI) can receive a merchant from a broker.
In an interview with The Economic Times, Kamath said that the low length “creates less fear on the negative side”. As a result, he said that the stock market is not as unstable as it would be without low profit.
“In India, we did not have this problem this year because there was hardly any benefit – it should be at the customer level, broker level, or entire industry level. There was hardly any forced leverage square-off, which meant that in other markets. When other markets were in the markets Fall, we fell short. And as it jumps back, we are close to almost all times.
When there is less profit in the market, it makes less foam on the opposite, and there is less fear on the opposing side. As a result, there is unlikely to experience more instability as a market, which means that instability is unlikely to be physical. The market is unlikely to be equally fearful because there is less profit in the market.
Describing how SEBI rules that limit leverage have saved bloodshed on Dalal Street, Kamath said that the pace of regulatory changes has been very crazy in the last 2-3 years.
He said, “Assuming you take a gander at the most recent five years, you can see that India has become less unsound than the US. Perhaps, most of the reason for this is due to the less influence of India.”
By 2010, it was almost unlimited leverage in India, and brokers could allow traders to buy as much as they wanted.
However, according to the current market watchdog SEBI guidelines, a broker cannot even fund the customer. A merchant can only get a maximum profit of up to five times the maximum benefit from the investment.
Last week, in a LinkedIn Post, on Zeroda’s 12th anniversary, Nithin Kamath appreciated SEBI’s new guidelines for making the markets less unstable.”He has acquainted another construction that controls the 24-hour exchanging rules, new exchanging status for market members and dismisses the capital market.”
“The new SEBI rules have likewise essentially decreased the gamble in the biological system, going from covering every one of the advantages to guaranteeing that the merchant’s down has more skin because the business develops. Some of these rules are also that. I think our markets were less unstable, and the stock prices between March and June this year reduced from large developed markets, for the first time I saw such behaviour, “Kamath wrote.
He said India’s capital markets are the best regulated and safest for retail investors regarding the arbitration risk.
Regulatory reforms in the industry are now on full throttle. After introducing many new rules, Hopefully, the market will be more efficient and, as a result, more profitable for investors. The effect of these changes is diverse. However, it is fundamental to note that these rules make the industry more efficient and profitable in the long run. There was a massive change in the revenue model, affecting how they worked. The company was working on a revenue model which was not profitable, and there was a lot of competition in the business.
The brokerage industry has long felt the heat of regulatory changes forcing them to survive and optimize to stay ahead of the curve. The ability to quickly suit regulatory changes is perhaps the most significant risk for the brokerage industry, in addition to the risk of markets decreasing.