Sebi, exchanges gears up surveillance to handle Rexit jitters

Regulator Sebi and stock exchanges have beefed up their surveillance and risk management mechanism to ring-fence capital markets from any excessive volatility tomorrow on account of RBI Governor Raghuram Rajan's surprise decision against a second term.

Banks and forex dealers are also gearing up to meet any excessive money demand, especially for dollar, on concerns that Rajan's eventual exit this September could trigger capital outflows amid jitters among foreign investors.

Maintaining that the Indian capital markets have a robust risk management and surveillance mechanism in place, senior officials said they have beefed up the systems to check any adverse eventuality.

The regulator and the bourses would also keep a strict vigil for manipulators looking to exploit the volatile trends expected in stocks and derivatives, including those linked to rupee's movement against other foreign currencies, they added.

Besides, brokers, portfolio managers and other market intermediaries would be under a close watch for any attempts to lure small retail investors into promises of hefty gains from the futures and options trading, especially in banking stocks and indices.

According to officials, the financial market regulators, including RBI itself, were already bracing up for volatile trends ahead of the Brexit referendum this week, but Rajan's sudden announcement over the weekend has added to the worry.

"Only respite is that Rajan chose a Saturday to make the announcement as any such development on a weekday during trading hours could have been much more serious despite a robust risk management and surveillance mechanism in place," a senior official said.

The regulators are especially worried after having seen the markets going into a tizzy recently just on unconfirmed reports that Rajan was not keen on a second term.

While announcing his decision against a second term after his current 3-year tenure ends on September 4, Rajan himself referred to the "imminent sources of market volatility like the threat of Brexit", though he hoped that the RBI would be able to "ride out" these concerns.