Understanding risk is as important as returns, stresses SEBI's Ananth Narayan G

SEBI whole-time member Ananth Narayan G

With a growing number of investors entering India’s capital markets, SEBI's whole-time member Ananth Narayan G has stressed the importance of understanding market risks and volatility.

Speaking at the International Conference on Financial Planning in New Delhi, Narayan emphasized that market movements are inevitable and that investment portfolios should be aligned with each investor’s individual risk appetite.

He pointed out that while many investors have joined the market in recent years and become familiar with the concept of returns, there is still a need to better internalise the meaning of volatility and risk. According to Narayan, the number of unique investors in the market has grown from 4.2 crore in March 2020 to 13 crore as of today.

Between April 2019 and June 2025, domestic investors brought in over Rs 18 lakh crore—approximately $210 billion—into risk-seeking, equity-oriented mutual fund schemes. This amount, he noted, is more than seven times the net inflows of $29 billion from foreign portfolio investors (FPIs) into the Indian equity markets during the same period.

Narayan also highlighted the importance of trust and governance in the market ecosystem. He warned that trust can be undermined by incidents of serious governance failures or market manipulation. In this context, he said that first-line regulators—such as exchanges and depositories—along with Sebi and other stakeholders, have a crucial role to play. Citing a well-known saying, he remarked that "if something sounds too good to be true, it probably is too good to be truthful". He emphasized that investors should approach the market with a healthy level of scepticism and take responsibility for their investment decisions.

Diversification across asset classes was another key point raised in his speech. He stated that sound financial planning requires diversification and noted a tendency among some small investors to heavily concentrate their investments in equities. To address this, Sebi is working to further strengthen the debt and commodities markets, providing investors with more robust alternatives.

Narayan also drew attention to rising cyber risks and digital frauds, which are becoming more prominent with increasing digitization. He urged investors to be vigilant and take precautions, as fraudsters—often highly organized and sophisticated—target unsuspecting individuals.

In addition, he shared details of SEBI’s initiative to conduct a household survey aimed at understanding how more investors can be brought into the market and how aware they are of associated risks. The survey also seeks to identify measures needed to promote responsible investing.

He further informed that, in the near term, Sebi is placing a strong focus on digital fraud awareness. In collaboration with exchanges, depositories, and the Association of Mutual Funds in India (AMFI), Sebi is working on a coordinated campaign to combat fraudsters and shut down unregistered entities operating in the financial space.