The volatility in the stock market will likely continue due to “exogenous” factors, Securities and Exchange Board of India chairman (SEBI) Ajay Tyagi said on Saturday.
He said that the Budget announcement to implement the long term capital gains tax on equity was a long-considered one, and the time was deemed opportune to implement it given the high market level. The subsequent corrections took place in response to global factors, he added.
“About market safety, I can assure you that there are some exogenous factors and some endogenous factors,” Mr. Tyagi said at a press conference. “The exogenous factors include what has been happening over the last 10 days in terms of hardening of bond yields in the U.S., or in terms of the oil price. This is something that everyone has to deal with because it’s a globalised connected market. You really can’t escape if you are dealing with capital markets.”
“Volatility perhaps may continue for some time because as you see in the U.S., the unemployment rates have really come down, wage rates have really gone up… Maybe it was more than expected,” Mr. Tyagi added.
Regarding the imposition of the 10% long term capital gains tax on equity, the SEBI Chairman said that the Finance Minister had already explained in detail in Parliament and outside the pros and cons of the decision and how the government arrived at it.
“About the timing, what was thought was that markets are booming, and this discussion was going on for a few years, and they felt right now is an opportune time to do it,” Mr. Tyagi added. “To say that there would be no effect of the LTCG would be incorrect. But to say that with a 10% LTCG there would be such an impact would also be totally incorrect.”
Mr. Tyagi also said that the Budget had announced two decisions that would deepen the bond market.
“In the Budget, two announcements which have been made, they will help in the further deepening of the bond market,” he said. “One is the requirement that 25% of borrowings by large borrowers be through the bond market. We will come out with regulations on this by September of this year. Obviously, those regulations will be ‘light touch’ regulations because it is to encourage corporates to move towards the bond market.”
Mr. Tyagi said that the other Budget announcement that would help the bond market was allowing pension funds and insurance companies to invest in A-rated bonds.
‘Looking into Fortis matter’
SEBI also said it was examining the issues surrounding group firms of Fortis Healthcare, which has landed in a controversy over alleged regulatory lapses in transfer of funds to some promoter-linked companies.
“We are examining the Fortis issue,” Sebi Chairman Ajay Tyagi told reporters after a board meeting of the regulatory body here today.
”...we also received a reference on Religare from somewhere I cannot not disclose and it will be looked into,” Tyagi further said.
Religare and Fortis have the same promoter groups.
Fortis Healthcare was issued notices by the stock exchanges yesterday following a media report claiming that the company’s promoters, the Singh bothers, took at least USD 78 million (about Rs 500 crore at current exchange rate) out of the publicly-traded hospital company they control without board approval about a year ago.
Replying to the notices, Fortis Healthcare said its wholly-owned arm Fortis Hospitals had deployed funds to the tune of Rs 473 crore as secured short-term investments to group firms of its promoters.
The company, which earlier on Thursday announced that its promoters Malvinder Mohan Singh and Shivinder Mohan Singh have quit the board, also said the loans are adequately secured and repayment has since commenced as per agreed payment schedule.
Amid all these developments, the company’s stock price zoomed by nearly 18 per cent yesterday following another unconfirmed media report about a possible merger of Fortis Healthcare with Malabar Hospital.
The media reports have also said that the company’s auditor, Deloitte Haskins and Sells LLP had “refused to sign off on the company’s second-quarter results until the funds were accounted for or returned“.
However, the healthcare chain refuted these allegations.
“We categorically deny the allegations that ‘Auditors have Refused to Sign the Accounts for Q2’ The results for the Q2 could not be tabled before the Board for approval and the same was communicated to the stock exchanges on November 14, 2017,” it said.
Stating that audit review process for results of both second and third quarters were in progress, the company said those would be presented before the board at their meeting scheduled on February 13, 2018.
Earlier on Thursday, the company had informed stock exchanges that the Singh brothers had resigned as directors from the company’s board following a Delhi High Court order upholding the Rs 3,500 crore arbitral award in favour of Daiichi Sankyo.
Individually, Malvinder Mohan Singh and Shivinder Mohan Singh held 11,508 shares each in Fortis Healthcare Ltd as on December 31, 2017 out of total 51,86,17,631 shares of the company.
However, the total promoter group holding through different entities is 34.43 per cent. (With PTI inputs)
