Be patient, volatility temporary, says Sebi chairman as Iran-Israel war roils global markets

Although the Iran-Israel/US war has made global markets extremely volatile, Securities and Exchange Board of India Chairman Tuhin Kanta Pandey said on Saturday that past disruptions show that periods of extreme volatility do not last forever, and that markets eventually stabilize. The Sebi chief said the real test of the market is not the presence of volatility but whether the existing system is able to function in a simple, fair and efficient manner.

He noted that past disruptions such as the Covid-19 pandemic and the Russia-Ukraine war show that periods of extreme volatility are temporary and that markets eventually stabilize. Pandey advised investors, especially retail participants, to be patient during such phases. He added that the real test of financial markets is not the absence of volatility but their ability to function smoothly, fairly and efficiently despite uncertainty.

“…geopolitical tensions continue to influence economic relations. The conflict in the Middle-East has disrupted energy supplies and created volatility in oil and gas markets around the world. However, when we look back at similar episodes from the past, one lesson becomes clear: periods of extreme volatility never last forever. In the recent past, we have been disrupted by Covid-9. Then there was the Russia-Ukraine conflict, which caused market volatility around the world. was – but they eventually stabilised,” Pandey said while speaking at an event organized by Moneycontrol.

“The real test of a market is not whether volatility is visible or not. The real test is whether the system continues to function smoothly, fairly and efficiently whenever. In uncertain times, the strength of a capital market does not lie in the absence of volatility. Volatility is a natural feature of markets. Real strength lies in the belief that the system will function transparently and even during transparent periods. Stress,” Pandey added, adding that he ‘increases capital markets in uncertain times. spoke on the title ‘making it efficient’.

The fear index India VIX has gained 124% in the last three months and is now hovering around 22.65. On Friday, it jumped more than 5% as markets saw a bloodbath. Indian benchmark indices fell sharply yesterday, posting their third consecutive decline, as the Iran-Israel/US war continued to hurt market sentiment. Metals, auto and financial stocks were the biggest gainers.

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In a volatile session, the broader Nifty fell 488.05 points, or 2.06%, to close at 23,151.10, while the 30-share BSE Sensex shed 1470.50 points, or 1.93%, to settle at 74.9265.

Pandey highlighted the role of efficient capital markets, which he said play a stabilizing role in an uncertain world as they enable transparent price discovery by absorbing shocks without destabilizing the broader financial system.

“And perhaps most importantly, they sustain investor confidence. Efficiency is the foundation of confidence in the financial system. Without that confidence,
Capital hesitates. Investment slows down. And sustaining growth becomes more difficult,” the Sebi chief said.

The Sebi chairman also said that the global economy is currently marked by uncertainty due to rapid technological changes such as AI.

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