Sebi to ban participatory notes

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SEBI monitoring market situation closely

1 lakh crore in the derivatives segment as on Monday, FIIs hold 35.98% of the net outstanding position. Of this, FIIs have exposure of more than 50% in individual stock futures, which also includes arbitrage positions and 27% exposure in index futures.

A fund manager, who did not wish to be named, said, “Markets will react severely.

The regulator has taken the right move to control the overheating in the market. When a FII invests in the Indian market, it first buys futures of the company and then buys the stock, which leads to overheating.”

Market experts feel that Sebi’s proposed move would certainly cap the current bull rally. Derivatives experts fear that since most positions in the derivatives segment are long, the unwinding of these positions could see a sharp correction on the market. The proposed move by the regulator is seen as welcome, as its implementation would ensure that new exposure in the Indian markets is through stable and accountable money.