Bars FII from issuing offshore derivative instruments on grounds of rules violation.
The Securities and Exchange Board of India (Sebi) on Monday approved the introduction of a new asset class, designed to offer greater flexibility to fund managers and target investors with a higher risk appetite. The markets regulator also cleared the liberalised Mutual Funds Lite (MF Lite) framework, aimed at fund houses that solely launch passively managed schemes. In another significant move, the board reduced the timeframe for rights issues from the current 317 working days to just 23.
Markets regulator Securities and Exchange Board of India (Sebi) is stepping up efforts to ease the onboarding of foreign portfolio investors (FPIs) and has constituted a cell for consultations with offshore investors and custodians, said whole-time member Ananth Narayan. Sebi is also working to make regulations more "light-touch" for FPIs that invest exclusively in government securities or are sovereign funds. The regulator is trying to make the registration process easier for such FPIs, the Sebi official said at the CII Financing 3.0 Summit in Mumbai.
Foreign institutional investors (FIIs) will have to provide more details of their activities in Indian equity markets to the capital markets regulator from April.
The Securities Appellate Tribunal has ruled that the Securities and Exchange Board of India was wrong in insisting that foreign institutional investors should furnish an undertaking that they have not issued P-Notes to certain select types of persons. A quick look at the law regulating FIIs would be useful. FIIs are persons resident outside India who, once registered with Sebi, enjoy a right to freely buy and sell securities on Indian stock exchanges.
According to estimates by Citigroup India, P-note investments, excluding the underlying shares, account for 34 per cent of FII assets with custodians in BSE-500 companies. Sebi stipulates that P-Notes can account for up to 40 per cent of FII assets under custody. This leaves room for FIIs to increase their exposure through P-notes 6 percentage points.
The move is aimed at arresting the surge in foreign inflows through PNs, which are offshore derivative instruments that allow foreign investors to invest indirectly in a country's stock market (see table), which has seen the benchmark BSE Sensex zoom more than 5,000 points in two months.
C B Bhave, chairman of the Securities and Exchange Board of India, said on Monday that the 40 per cent limit on investment through offshore derivative instruments, or Participatory Notes, will be removed.
New regime places more limits on unregulated foreign entities
The announcement made by Sebi chairman M Damodaran that new rules on Offshore Derivatives Instruments such as PNs have come into effect in-line with the proposals made last week has put to rest all the confusion over the whole issue and normalcy is set to return to the bourses, a broker said.
Swiss brokerage UBS joins European banking peer HSBC in shutting down its offshore derivative business
The value of P-note investments in Indian markets - equity, debt, hybrid securities and derivatives - stood at Rs 74,027 crore till August-end.
FPIs would be classified into two categories instead of three, while the requirements for issuance and subscription of offshore derivative instruments would be rationalised.
The government on Tuesday said it will allow setting up of world-class foreign universities in Gandhinagar's GIFT City, free from domestic regulations, to facilitate availability of skilled manpower in the financial services space. In addition, an international arbitration centre will be set up in the GIFT City for timely settlement of disputes under international jurisprudence, Finance Minister Nirmala Sitharaman said while presenting the Union Budget for 2022-23. The centre could be on the lines of the Singapore International Arbitration Centre, or the London Commercial Arbitration Centre.
This route accounts for Rs 2.75 lakh crore of FPI holdings.
P-Notes are mostly used by overseas HNIs.
The Securities and Exchange Board of India (Sebi), the market regulator, has said, in a submission to the Supreme Court, that it is "enquiring" into the allegations made by American short-seller Hindenburg Research against the Adani Group of companies and its impact on the markets. In the same matter, the central government has agreed to form an expert committee to strengthen the regulatory regime in order to ensure that market investors are protected. The Supreme Court had last week suggested an expert committee to look into the allegations and had asked the Centre for its response.
Investments through participatory notes (P-notes) in the Indian capital market rose to Rs 91,658 crore at February-end, making it the highest level in 33 months, suggesting growing confidence of overseas investors. P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly. They, however, need to go through a due diligence process. According to Sebi data, the value of P-note investments in Indian markets -- equity, debt and hybrid securities - increased to Rs 91,658 crore in February-end from Rs 84,916 crore at January-end.
P-Notes, mostly used by overseas High Networth Individuals, hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors.
"The CPI(M) is of the firm opinion that PNs should be prohibited, as has been recommended by the RBI," a statement issued by the CPI (M) Politburo said, coinciding with the market meltdown on the SEBI's proposals to curb such offshore derivatives. The CPI (M) said massive pull-out of funds which induced a huge fall in the market reflected defiance of regulatory institutions by the FIIs.
The group, headed by former RBI deputy governor H R Khan, has also pitched for liberalised investment cap, review of prohibited sectors for foreign investment for FPIs, permitting FPIs for off-market transactions and review of restriction on sovereign wealth funds for investment in corporate debt securities.
The government has not set up any committee to probe allegations a US short seller labelled against the Adani Group, but stock market regulator SEBI is investigating market allegations against the group, the Lok Sabha was informed on Monday. A separate investigation into imports of Indonesian coal by the conglomerate hasn't reached finality, Minister of State for Finance Pankaj Chaudhary said. Lok Sabha saw several questions being put by MPs to the government on the Adani issue, which were replied through written responses by the minister.
Besides higher tax outgo, P-note issuers are worried about operational difficulties
Sebi has put in place a strong deterrence to check any misuse of participatory notes.
Bear operators are said to have created huge short positions in the stock market over the past few days, which means they were betting on a fall in the market values
This may mean easier access, simplified KYC and documentation requirements, and fewer investment restrictions for a majority of FPIs, especially broad-based funds and pooled vehicles that were earlier part of Category-II.
Sebi has also been asked to put in place a mechanism to monitor the beneficial owner of P-notes
According to the committee, single overseas investments of more than 10 per cent in a company should be considered as Foreign Direct Investment while those less than 10 per cent should be classified as foreign portfolio investment.
INX will trade initially in equity derivatives, currency derivatives, commodity derivatives including index and stocks
CBDT circular issued last month had raised multiple taxation concerns.
The RBI stipulated on Thursday that foreign institutional investors would require a mandate from participatory note holders to hedge on their behalf.
The Budget has relaxed a few safe harbour rules that aim to make it easier for fund managers overseeing offshore India-focused funds to relocate to the country.
Sebi is looking at further tightening the norms for P-Notes to address concerns raised by the Special Investigation Team on black money.
These funds give the wealthy an option to invest in strategies that other equity products like mutual funds and portfolio management services cannot, says Nishant Agarwal.
The Bengaluru skies dazzled with somersaults and stunts by metal birds.
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