In an effort to improve liquidity of the equities market, India's markets watchdog Securities and Exchange Board of India (SEBI) Monday removed some restrictions on foreign funds, like the 40 percent cap on participatory notes and overseas derivative instruments.
According to report from Indo Asian News Agency, the regulator also decided to review the entire working of foreign institutional investors (FIIs) in the country and said a policy paper will soon be unveiled to invite comments and suggestions from all stakeholders.
The decisions, taken at a meeting of the SEBI board here, were announced by its chairman C.B. Bhave and came even as the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) dropped to its lowest level in over two years, with a fall of nearly six percent Monday.
"The 40 percent cap on assets under custody in the cash market will be removed," Bhave said, clearly signaling the regulator's move to curb the outflow of investments by foreign funds.
Foreign funds are feared to have sold over 9 billion U.S. dollars worth of equity in Indian stock markets this year, resulting in a drop of over 30 percent in the Sensex during a 52-week period.
"The entire framework for foreign institutional investor participation needs to be reviewed," Bhave said, "Such curbs are no longer necessary."
Source: Xinhua
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