How SEBI’s easing of regulatory norms for FPIs may be big boost for stock markets

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Published: August 22, 2019 2:22:28 PM

With SEBI easing the regulatory framework for foreign portfolio investors (FPIs), the stock markets are expected to become more attractive with investments getting boost, said experts.

Dollar, market, Fed verdict, pound, trade conflict, market news, Federal Reserve, Jerome Powell, On Wednesday, SEBI had revised FPI regulations based on the recommendation of a committee headed by former RBI deputy governor HR Khan.

With SEBI easing the regulatory framework for foreign portfolio investors (FPIs), the stock markets are expected to become more attractive with investments getting boost, said experts. Even as further details are awaited, this is likely to be a big step by the markets regular especially for the pension and university funds, Sameer Gupta, Tax Partner, Financial Services, EY India, said. “The ask from the Global Asset management industry for long has been to dispense with the broad based criteria, which has passed its necessity, as a basis to establish diversifies ownership. Accepting global standards  where flows are accepted on the basis of whether it is a regulated fund from a pedigreed jurisdiction, should be the norm,” Sameer Gupta added.

Since new tax regime was announced by Finance Minister Nirmala Sitharaman in the budget, Indian equities worth $3.2 billion were sold by the foreign investors since July 2019. On Wednesday, SEBI had revised FPI regulations based on the recommendation of a committee headed by former RBI deputy governor HR Khan. The FPIs would now be classified into two broad categories as against three earlier. The markets regulator also removed broad-based eligibility criteria for institutional FPIs to ‘simplify and expedite’ the registration process of FPIs. With these and various other changes, the market has opened up to an entirely new class of FPI investors.

The experts also said that the move by SEBI to rationalise the need for issuance and subscription of offshore derivative instruments (ODIs) is also a big development as it was under discussion since former RBI governor Raghuram Rajan’s time.

“The Key aspects of the proposed regulations is to simplify, expedite and ease compliance by doing away with the broad based eligibility criteria. FPIs to be categorised into Category I and II. Category III is done away with. KYC Documentation has been simplified. Offshore funds of Indian mutual funds permitted to invest in India post registering as FPI. Issuance and subscription of Offshore Derivative Instruments (ODIs) popularly known as P-notes rationalised,” Jairaj Purandare, Chairman, JMP Advisors said while summarising the latest changes.

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