SEBI’s AI Rules Coming Soon: How It Will Reshape Capital Markets

The Securities and Exchange Board of India (SEBI) is finalizing guidelines to govern artificial intelligence (AI) in capital markets, emphasizing its role in enhancing surveillance, risk assessment, and fraud detection while addressing risks like opacity, bias, and cybersecurity. SEBI Chief Tuhin Kanta Pandey stated during the ET NOW Markets Summit 2026 that AI will be central to the regulatory agenda, with plans to integrate the International Organization of Securities Commissions’ (IOSCO) AI supervisory toolkit into its strategy. SEBI has already flagged risks posed by AI tools, including vulnerabilities like those exposed by AI-driven tools such as Claude Mythos, which could exploit market weaknesses at scale. The regulator warned of concerns over data confidentiality, application integrity, and output reliability in a recent circular. Pandey highlighted India’s capital market resilience amid challenges like tariffs, oil price shocks, and foreign portfolio investor outflows, noting that the market raised over 1.5 lakh crore via equity and corporate bonds. The initial public offering (IPO) pipeline remains robust, he added, while reforms like the T+1 settlement cycle and reduced IPO timelines to T+3 have strengthened investor confidence. The framework will be guided by an expert panel’s recommendations for a five- and ten-year roadmap, ensuring responsible AI adoption in market infrastructure. SEBI’s digitization efforts, including improved fund-blocking mechanisms, have already enhanced accessibility and efficiency for investors. The regulator aims to balance AI’s potential benefits with mitigating risks, ensuring accountability and data protection in capital markets.