Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), delivered a keynote address at the 17th annual Corporate Governance Summit organized by the Confederation of Indian Industry (CII) in Mumbai on Tuesday.
In her address, Buch highlighted the critical role of trust in the functioning of both markets and the broader economy. "The entire edifice of not just the market but the entire economy rests on trust," she stated, emphasizing that trust is a two-way street between industry players and regulators.
Buch highlighted the importance of transparency as the fundamental attribute of trust, noting that the regulator serves as a proxy for the wider investor base.
"With 44% of shareholding controlled by promoters and 56% by the public, the regulator represents the interests of the latter, making trust-building efforts between industry and regulators crucial for market integrity", she added.
Addressing concerns over the valuation of Indian stocks, Buch pointed out that despite India's relatively high price-earnings (PE) multiples, the country continues to attract investments due to global investors' faith and trust. She compared India's PE ratio favorably with world indices, noting its higher valuation compared to major economies, except Japan.
PE ratio is the ratio of the share price of a stock to its earning per share(EPS). It is a valuation metric which indicates whether a stock or an index is expensive or cheap.
On the implementation of the trading plus one (T+1) trade settlement cycle, Buch reported improvements in the defect rate of settlement measured by the delivery versus payment (DVP) ratio. This settlement method has contributed to enhancing market efficiency and integrity.
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