Don't blame FPI sell-off alone, slowdown weighing on markets: Sebi chief

Ajay Tyagi says steps needed to improve FPIs sentiment have been taken, hints at impact of tepid corporate earnings on markets

Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi on Friday said that the fall in the market could not be fully attributed to foreign portfolio investors' (FPIs) sell off as both global and domestic slowdown were weighing on market sentiments.

Speaking on the sidelines of a seminar 'Onshoring the Offshore' at the Gujarat International Finance Tec-City (GIFT City)'s International Financial Services Centre (IFSC), Tyagi said whatever steps were needed to prevent further sell off by FPIs had been taken.

"There are other reasons pertaining to the economy. It is not just the FPI sentiment. Corporate earnings are not improving and there is a general slowdown issue. It is very difficult to say that it is because of FPI selling. Whatever on the operational side one could do one has already simplified and rationalised," said Tyagi, adding that the FPIs would be satisfied with the steps. 

Recently, the regulator eased the process for on-boarding of overseas investors, with Sebi saying that would no longer be required to meet the 'broad-basing' criteria, under which at least 20 investors were required to establish a fund. Also, central banks that are not members of the Bank for International Settlements (BIS) will be allowed to register as FPIs. Whereas offshore funds floated by Indian mutual funds will be permitted to invest in the domestic markets under the FPI route.

Elaborating on the overall sluggish market scenario, Tyagi said, "Since September last year after the IL&FS issue, the debt market sentiment got impacted. Thereafter, we saw some sort of anxiety over the elections which got over and after that we are having this issue of slowdown in economy globally and to that extent domestically as well. That is why we are seeing IPOs also not happening. Hopefully, we will some pick up in the second half."

In his keynote address during the seminar at GIFT City, Tyagi said that Sebi was in advanced stage of talks with GIFT City to issue operational guidelines for investment advisors and portfolio management services to begin operations within the latter's IFSC.

"Apart from alternate investment funds (AIFs), there are other fund management related services which can provide significant boost to onshoring the fund management industry in India," said Tyagi while adding that the regulator had already permitted several intermediaries as stock brokers, depository participants, merchant bankers to operate from IFSCs.

Enumerating the extent of debt listings at GIFT IFSC, Tyagi said that so far medium term notes worth over $42 billion, masala bonds worth Rs 5,950 crore and green bonds worth $1.6 billion had been listed. "While many of the current listings have been secondary, there was a scope for primary listings going forward," he said.

Tyagi said that the success of market infrastructure institutions (MIIs) at the IFSC could be assessed by turnover on various products at the international exchanges which was encouraging in the wake of two international exchanges at GIFT IFSC achieving average daily turnover of $ 3 billion. 

"With new products being launched and the existing products picking up, I expect the turnover to only increase," he said, adding that equity index derivatives market on both the exchanges had picked up too. "Fiscal 2018-19 saw a turnover of $179 billion across both the exchanges. The first four months of 2019-20 has already seen a turnover of $183 billion, which is quite encouraging," said Tyagi.

On commodity front, Tyagi said turnover in gold futures in the first four months of current fiscal stood at $15 billion as against $52 billion in last fiscal.