Author: Aditya Pareek | EQMint | Finance News

The Reform India’s Markets Have Been Waiting For India’s market regulator, the Securities and Exchange Board of India (SEBI), has initiated active deliberations to deepen the cash equity segment — a move that could significantly rebalance the country’s market dynamics, long dominated by the booming derivatives trade.

According to reports, SEBI is exploring structural reforms that could make the cash market — the segment where investors buy and sell shares for actual delivery — more liquid, accessible, and investor-friendly.

While the derivatives segment has witnessed explosive growth in recent years, SEBI’s latest initiative signals a strategic shift toward sustainable capital formation and reduced speculative excesses.

Why SEBI Wants to Strengthen the Cash Segment

In the past five years, India’s cash market has seen remarkable growth — the average daily turnover doubled from ₹39,000 crore in FY20 to over ₹1.2 lakh crore in FY25 (NSE and BSE combined). Yet, the derivatives market still accounts for over 95% of total volumes — creating a structural imbalance.

SEBI’s push is aimed at correcting that skew. As one SEBI official noted, “The cash segment remains the real foundation of equity ownership and capital formation.”

Key factors behind the move:

• To promote long-term investing over leveraged intraday trades.
• To reduce systemic risk from excessive speculative activity in F&O.
• To enhance liquidity and price discovery in mid- and small-cap stocks.
• To broaden participation among retail and institutional investors.

What’s on the Table: Possible SEBI Reforms

SEBI’s internal and stakeholder discussions reportedly cover multiple fronts:

1. Reduced Margin Requirements – To make cash trades more capital-efficient compared to derivatives.
2. Lower Securities Transaction Tax (STT) – Especially on delivery-based trades to encourage real investing.
3. Boosting Stock Lending & Borrowing Mechanism (SLBM) – To add liquidity and enable better shorting mechanisms in the cash segment.
4. Promoting ETFs and Passive Products – To expand participation and diversify investment options.
5. Stronger Market Infrastructure – Exchanges may be asked to simplify settlement processes and reduce friction for retail investors.

Implications for India’s Capital Markets

If implemented well, SEBI’s reforms could trigger a structural realignment of the Indian equity ecosystem:

• For investors: More transparency, better execution, and fairer participation.
• For brokers: Opportunities to design innovative, low-cost products around delivery-based trades.
• For listed companies: Greater liquidity in shares and improved long-term investor engagement.
• For regulators: A healthier balance between speculation and investment — improving market resilience.

Ultimately, a deeper cash market means stronger capital formation, reduced volatility, and a more robust equity culture across India.

The Road Ahead

SEBI’s active consultations — including feedback from exchanges, brokers, and industry experts — are expected to culminate in a public consultation paper outlining proposed measures, implementation timelines, and fiscal recommendations.

This paper will be crucial in defining how India transitions from a trading-heavy to an investment-driven market structure.

EQMint will continue to track this story closely and provide timely updates on policy outcomes, potential STT changes, and their likely market impact.

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Disclaimer: This article is based on information available from public sources. It has not been reported by EQMint journalists. EQMint has compiled and presented the content for informational purposes only and does not guarantee its accuracy or completeness. Readers are advised to verify details independently before relying on them.