The Securities and Exchange Board of India (Sebi) has addressed several issues that foreign portfolio investors (FPIs) had perceived as impediments over the past year, chairman Tuhin Kanta Pandey said.
In an interview with FE, Pandey said the regulator held 77 meetings with FPIs in small groups, besides several larger interactions, over the past year. The feedback, he said, has largely been positive, reflecting investors’ past experience with the Indian market.
Structural Gains
Sebi has acted on a number of long-standing FPI requests, including concerns relating to registration timelines, digitisation, digital certificates, streamlining the India market access portal, the block deal framework and the closing auction mechanism.
“They had also sought a netting mechanism — allowing offsetting of same-day buy and sell cash-market transactions — which is currently under consultation and will be implemented,” Pandey said.
The reforms come amid turbulence in equity markets, with FPIs turning net sellers in recent months. “We have to keep our heads down and focus on where we can improve — whether it is market infrastructure, credibility, technology, enforcement or surveillance,” he added.
Pandey said FPI flows must be viewed in the context of investors optimising post-tax returns. As nimble capital, they move across markets depending on relative valuations, currency movements and sectoral opportunities. At present, he noted, investors are looking at markets such as Taiwan and Korea, driven by sectors like silicon, artificial intelligence and electronics. “These sectors are now being built in India as well. In a few years, they should be represented in our public markets,” he said.
Primary Market Paradox
He also emphasised that FPI flows are not a one-way story. While investors have been selling in the secondary market, they have remained active participants in the primary market.
Between April and January, FPIs sold equities worth about $9.5 billion in the secondary market, but were net buyers of $7.2 billion in the primary market. As of end-January, FPI equity assets under custody (AUC) stood at $775 billion, up from $285 billion at the end of FY16. Including debt and other instruments, total AUC aggregated to $853 billion.
To deepen market participation, curb cybercrime and boost initial public offerings, Sebi plans to open eight additional offices to ensure greater on-ground presence and closer coordination with stakeholders. “Not everything can be done online,” Pandey emphasised.