‘Market mirroring real activity in economy’

livemint.com:

Edited excerpts: The intention of regulation is to create checks and balances in the market where there is a significant rise, driven either by flows or by a huge participation coming from high networth individuals (HNIs) and retail. Some elements of checks and balances need to be created. Whatever the noise emanating from the regulation is more intended towards that (checks and balances) so that people don't assume that the market will continue to rise.

Secondly, they (participants) also ignore any investment that is being made at obnoxious valuations and so on. Therefore, the intervention that came was more intended towards this end. Otherwise the intention is to allow the market to find its own path, the free market.

It's not just today. Historically I've seen that regulatory interventions always help the market to stabilise. The buoyancy continues to remain high, and that optimism and buoyancy is coming on the back of expected GDP growth being close to about 7.5-8.0%.

I often say that all cylinders are firing in the Indian economy, which is driven by broadening of the economic growth across the wider segment of India. Therefore, we are finding more and more companies are benefiting out of the increase—increase in revenue, increase in order book, increase in revenue and increase in profit. We are seeing this across the board.

That's why we see the market construct having changed from high concentration coming from Nifty 50 companies about 15 years back in the overall dominance of market cap from 80% to around 50-55% now. That decrease has been taken up by the market cap of the rest of the companies (midcap and smallcap) rising, particularly, over the past four years. These companies could not have taken such a large