SEBI to Curb Market Volatility Restriction Introduced in March

SEBI has decided that it will relax some of the restrictions it had imposed to curb market volatility that ensued with the outbreak of COVID in India in March. 

India’s COVID-19 cases started to climb in March, caused the government to place nationwide lockdown with hope to break the chain. It spiked widespread market speculation and a selling spree from investors. Alarmed by the sell-off triggered by the pandemic, the market regulator forced certain regulatory restrictions to curb the steep fall in indices. 

To Assist Market Recovery SEBI Revises Steps To Curb Market Volatility

“Based on market feedback and changing market environment, the above regulatory measures have been reviewed,”

In a public circular issued, the regulator said that it would lift restrictions, imposed in March, on stock futures and options to restrict widespread speculations.  It is also going to ease the increased margin requirement for non F&O stocks in the cash market from November 26. 

Restrictions implemented by SEBI to curb COVID induced volatility included limiting Market Wide Position Limit (MWPL) on stocks F&O from 95 percent to 50 percent. The margin for non-F&O stocks in the cash market was pegged at 40 percent for stocks with more than 10 percent price movement during intraday trading. 

Here Is A List Of What Will Change And What Is Going To Stay 

• Based on market feedback, SEBI decided to ease restriction on MWPL. Earlier SEBI lowered it to 50 percent. 

SEBI, while lifting the 50 percent cut-off on MWRL, said that the market can now operate at the original 95 percent limit. However, in the case of Market Wide Position Limit crossing 95 percent, the scrip will enter a ban period where traders will be allowed only to sell to reduce their holding capacity. 

• Any increase in the open position will attract penalty and disciplinary action from the stock exchange and clearing corporation. The bourse is going to monitor daily intraday trading to track if any member or client is exceeding the upper limit.
• The 40 percent margin for cash market trading will also relax.       
• SEBI is not lifting restrictions posed on index derivatives and flexing of dynamic price band for F&O. The 15-minute cooling-off limit will remain in place before flexing of the dynamic price band is allowed.

Conclusion 

SEBI eases the restrictions as the market is showing signs of recovery. On Tuesday, Nifty crossed the 13,000 milestones to register a new high in the market. There is also an increase in FII with an infuse of fresh USD 7 billion, indicative of returning faith of foreign investors in Indian stocks. Relaxations on restrictions will further assist in quick recovery of the market amid the pandemic condition.