The capital markets regulator is considering liberalising the norms for foreign portfolio investment.
The proposal being considered by the Securities and Exchange Board of India (Sebi) is to allow direct entry of qualified institutional investors (QIIs) in the market and allow non-resident Indian investors to invest directly in the secondary market as QIIs.
Sebi’s board is meeting tomorrow and these issues are likely to come up. The timing is also conducive for liberalising foreign investment norms, as the Indian currency has been depreciating sharply. The other issues that can come up include making the primary (public issue) market more efficient.
Tomorrow’s meeting will be just the third after U K Sinha took over as chairman of Sebi in February. The earlier meeting was on July 28, when a number of important decisions were taken, including a new takeover code, harmonisation of KYC (know-your-customer) norms and a review of policies on mutual funds. His first board meeting, in March, was short and no major decisions were taken.
Then Sebi chairman had restructured the Primary Market Advisory Committee. It met recently and had discussed the processes in primary market operations, including how to further shorten the time gap between issue closure and listing. Based on the recommendation of the committee, the board may discuss these concerns.
At present, QIIs have to invest in the Indian market through foreign institutional investors (FIIs) or have to take FII status, where the regulatory requirements are stringent. Several provident and endowment funds having a huge investible corpus could invest in Indian market if allowed direct entry and Sebi is considering this. QIIs are already allowed to invest in Indian mutual funds. Sinha is understood to have asked the advisory committee to look at the complete processes of the primary market and recommend if some overhaul is required. This exercise will also be useful in deciding how the timeframe between issue closure and listing could be reduced.
Sebi had in September issued a concept paper for regulating alternative investment funds, such as private equity funds, PIPE (private investment in public equity) and real estate funds. These funds invest in listed and unlisted equities but are not registered anywhere and are not regulated. Sebi has proposed regulation of such funds.
However, the proposal met with severe criticism from the industry, which said private funds need not have stringent regulations like public funds. The issue is also likely to come up in the board meeting.
