In the face of continuing uncertainty in the domestic stock markets, the Government and Reserve Bank of India may look at allowing foreign institutional investors to temporarily park their funds in the domestic debt market, a top Sebi official said.
"Many FIIs have approached us demanding permission to park their funds temporarily in the G-sec and Corporate Bond markets given the high volatility in equity markets.
The matter may be looked into by the concerned authorities so as to prevent a fight of FII funds from the system," Sebi's Whole time member, T C Nair told PTI here.
Peturbed by the high volatility in India's premier stock exchanges, a few FIIs have approached the market regulator with this demand, Nair said.
Presently, FIIs are allowed to park upto $8-billion in the domestic debt markets, which includes upto $5-billion in the government securities and upto $3-billion in the corporate bonds. FIIs have asked Sebi to temporarily raise the ceiling to $10-15 billion as against the present $8-billion.
The weakness in Sensex continued today as investors continued to exit positions, primarily owing to the advesre sentiment about a possible spillover of global financial downturn into the domestic system.
In order to ease the prevailing tight liquidity conditions, the Reserve Bank yesterday slashed its cash reserve ratio by 0.5 per cent, releasing Rs 20,000 crore into the banking system.
