SEBI Sees No Systemic Risk in Indian Stock Markets Despite Global Tariff Volatility

In the wake of renewed market volatility driven by the global tariff tensions initiated by US President Donald Trump’s trade policy, India’s stock market regulator has come forward with a clear message: There is no systemic risk to the Indian capital markets.

Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), addressed concerns about market disruptions due to external pressures and rising volatility to the media. “I think investors have no need to panic,” Pandey remarked, assuring that despite the turbulence, the system remains fundamentally sound.

A Settlement System Designed to Withstand Shocks

Highlighting the resilience of the Indian stock market infrastructure, Pandey pointed to the uniqueness of India’s settlement system. He noted that trade clearing houses of both the National Stock Exchange (NSE) and BSE – India’s 2  largest bourses – are interconnected. This means that if 1 exchange were to encounter difficulties, the other could step in to settle trades seamlessly, preventing a broader market breakdown.

This interoperable structure significantly reduces the chances of a system-wide collapse and ensures the continued functioning of the market during periods of elevated volatility.

Dematerialisation Offers Investor Protection

A major strength in India’s market ecosystem, according to Pandey, lies in the dematerialisation of securities. In this system, investors hold their securities in electronic form, directly linked to their bank accounts.

Because of this direct linkage, fund transfers happen automatically, reducing the risk of broker defaults impacting retail investors. “Money from any transaction is directly debited or credited to their bank accounts,” Pandey said, adding that this setup acts as a robust firewall against client-level financial losses in the event of intermediary issues.

India VIX Surges, But Equities Remain Resilient

Despite a record surge in the India Volatility Index (India VIX) — often referred to as the “fear index” — Indian equities have shown greater resilience compared to several global markets.

The India VIX spike reflected a rise in investor anxiety on Monday, yet domestic equities have relatively outperformed peers since the US began imposing steep import tariffs. The response of Indian investors has been measured, and volatility has not led to widespread market disruptions.

Conclusion

According to Pandey, the Indian investor landscape is also evolving. “I think the people are also learning to stay calm,” he noted. This behavioural shift, combined with systemic safeguards, appears to be fortifying India’s market response to global economic headwinds.

He further reassured that the risk of systemic failure is minimal, and that India’s financial ecosystem is equipped to protect investor interests, even in the face of external shocks.

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