'Avoid reacting to every piece of news': SEBI chief explains what retail investors get wrong

SEBI chairman Tuhin Kanta Pandey has said the market regulator will not step in to curb the soaring valuations of new-age companies tapping the public markets, insisting that investors must rely on disclosures to decide whether an issue is worth backing.

In an interview with The Economic Times, Pandey said investors uncomfortable with IPO pricing are “entirely within their rights” to skip or reject an issue.

“Not everyone has to agree with a company’s valuation — these are judgment calls based on expectations of future growth and analysis of available data,” he said. “Our role is to ensure that investors have the information they need.”

Pandey said SEBI is preparing new reforms to introduce a concise summary of key points in the prospectus for easier comprehension.

Offer documents already contain “extensive material” for evaluating risks and valuation logic, he added, and institutional investors conduct rigorous checks through roadshows and queries to companies and merchant bankers.

“Investors always have the choice to reject an IPO, skip it, or criticise its valuation. We cannot restrict people from expressing their views — public scrutiny is integral to the public issue process.”

Pandey also cautioned against impulsive reactions to market volatility, noting that stock prices often move sharply even though underlying fundamentals remain unchanged.

“A company’s fundamentals do not change ten times a day, but its stock price may move ten times a day,” he said.

“Markets can sometimes take extreme positions and then correct themselves quickly. A sharp fall in the index does not necessarily reflect a corresponding change in fundamentals,” he said, urging retail investors to develop greater sophistication and avoid reacting impulsively to every piece of news.

“This is why we consistently emphasise long-term investing.”

Pandey also defended the growing dominance of offer-for-sale (OFS) structures in recent IPOs, where private equity investors partially or fully exit their holdings. In high-risk, early-stage ventures, he said, it is natural for early investors to monetise once the company matures.

“There is no contradiction between a private equity investor exiting and the broader purpose of the primary market,” he said.