He noted that past disruptions like the COVID-19 pandemic and the Russia–Ukraine war showed that periods of extreme volatility are temporary and markets eventually stabilise. Pandey advised investors, especially retail participants, to remain patient during such phases. He added that the real test of financial markets is not the absence of volatility but their ability to function smoothly, fairly and efficiently despite uncertainty.
“… geopolitical tensions continue to influence economic relationships. Conflict in middle-east has disrupted energy supplies and created volatility in oil and gas markets across the world. Yet, when we look back at similar episodes in the past, one lesson becomes clear: periods of extreme volatility never last forever. In the recent past, we have witnessed the disruptions caused by the COVID-19 pandemic, followed by the Russia–Ukraine conflict, which has triggered market volatility across the world. Markets experienced turbulence — but they eventually stabilised,” Pandey said, while speaking at an event organised by Moneycontrol.
“The real test of a market is not whether volatility appears. The real test is whether the system continues to function smoothly, fairly and efficiently when it does. In uncertain times, the strength of a capital market does not lie in the absence of volatility. Volatility is a natural feature of markets. The real strength lies in the confidence that the system will function fairly, transparently and efficiently even during periods of stress,” Pandey added as he spoke on the subject titled ‘Making Capital Markets More Efficient in Uncertain Times’.
Fear Index India VIX has shot up 124% in the past three months and is now hovering around the 22.65 mark. On Friday, it shot up over 5% as the markets witnessed a bloodbath. The Indian benchmark indices fell sharply yesterday, recording their third successive decline as the Iran-Israel/US war continued to dent market sentiments. The biggest drags were metals, auto, and financial stocks.
Also read: FIIs sell Indian equities worth Rs 52,704 crore in March, so far; Friday records its highest single-day outflow in 2026
In a volatile session, the broader Nifty plunged 488.05 points, or 2.06%, to close at 23,151.10, while the 30-share BSE Sensex declined 1470.50 points, or 1.93%, to settle at 74,563.92.
Pandey highlighted the role of efficient capital markets, which he said play a stabilising role in an uncertain world as they enable transparent price discovery while absorbing shocks without destabilising the broader financial system.
“And perhaps most importantly, they sustain investor confidence. Efficiency is the foundation of trust in the financial system. Without that trust,
capital hesitates. Investment slows. And growth becomes more difficult to sustain,” the Sebi Chief said.
The Sebi Chairman also said the global economy is currently marked by uncertainty due to rapid technological changes such as AI.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
