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What is SEBI

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What is SEBI?

Every firm/platform is being regulated by a concerned organisation like all the banks function under the eye of RBI (Reserve Bank of India). In a similar way, the stock market functions under the eye of SEBI (Securities and Exchange Board of India). SEBI is a regulatory body for securities and commodity markets in India under the jurisdiction of the Ministry Of Finance, Government of India.

Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory body for regulating the securities market. It became an autonomous body on 30 January 1992 and was accorded statutory powers with the passing of the SEBI Act 1992 by the Indian Parliament. SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai.

The SEBI is managed by its members, which consists of the following:
The chairman is nominated by the Union Government of India.
Two members, i.e., Officers from the Union Finance Ministry.
One member from the Reserve Bank of India.
The remaining five members are nominated by the Union Government of India, out of them at least three shall be whole-time members.
Currently, Ajay Tyagi is the chairman of SEBI.

BEAR AND BULL MARKETS

In the investing world, the terms “bull” and “bear” are frequently used to refer to market conditions. These terms describe how stock markets are doing in general—that is, whether they are appreciating or depreciating in value.
A BULL MARKET is a market that is on the rise and where the economy is sound whereas A BEAR MARKET is a market where the value of stocks declines and the economy is receding.

BEAR MARKET

BULL MARKET 

Strong demand & weak supply for securities

Weak demand and strong supply for securities

Market sentiment from the eye of an investor is NEGATIVE.

Market sentiment from the eye of an investor is POSITIVE.

Associated with the WEAK economic conditions.

Associated with the STRONG economic conditions.

The ideal thing for an investor to do is to take advantage of rising prices by buying stocks early in the trend (if possible) and then selling them when they have reached their peak.

Since, the chance of losses is greater because prices are continually losing value. Thus, most of the profitability can be found in short selling or safer investments. 

How did SEBI came into Existence ?

With the increase in the dealings of stock markets, a lot of malpractices also started in stock markets such as price manipulation, delay in delivery of shares, violation of rules and regulations of stock exchange and listing requirements. Due to these malpractices the investors started losing confidence in the stock exchanges. As a result, the Government of India decided to set up an agency or regulatory body known as Securities Exchange Board of India (SEBI).

Shri. Rajiv Gandhi, then Prime Minister of India, in his budget speech for the financial year 1987-1988, declared the government’s intention to set-up a separate authority for the regulation and orderly functioning of the Indian Capital Market. By notification dated April 12, 1988, the Securities and Exchange Board of India (SEBI) was constituted as an administrative body to function under control of the ministry of Finance primarily to promote orderly and healthy growth of the securities market and for investor protection.

However, initially SEBI was not able to exercise complete control over the stock market transactions. It was left as a watchdog to observe the activities but was found ineffective in regulating and controlling them. As a result, SEBI was given statutory powers and the Securities and Exchange Board of India was established as statutory body on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.

Preamble of SEBI Act describes the basic functions of the Securities and Exchange Board of India as
“…to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”

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