FPI green corridor: Sebi plan to attract overseas funds in equity market

Kolkata: If you invest in Indian stocks and is rather confused as to see the market keep moving sideways over the past few months and bothered by the news of FPI exits from the market, note than market regulator Sebi is also seized of the matter. While the FPIs are offloading some of their holdings in Indian market -- a total of more than Rs 80,000 crore in July and August -- Sebi is planning an automatic window for foreign investors to invest in the equity markets to facilitate the inflow. Earlier Sebi directors likened the facility to that of a diplomatic passport at the airport.

Reports stated that the preparations are at an advanced stage and the market regulator will take it up in their board meeting on September 12. The proposal is to pave the way for quick simple registration and lower compliance so that eventually it leads to ease of doing business, so that funds flow easily into the Indian market. According to data, the AUM of FPIs is about Rs 81 lakh crore in India.

Once the proposal gets the boards nod, it would apply to as much as 70% of registered FPIs which number 11,913. Retail funds such as Goldman Sachs and sovereign funds such as Norway pension fund, CPPIB of Canada will be covered by it, stated reports. The realisation that processes have to be made simpler and compliance easier led to

Sebi chairman Tuhin Kanta Pandey and director Ananth Narayan meet more than 200 FPIs in Singapore this month to know their mind.

At is the current practice, FPIs can invest through more than one route. These are based on the type of investor, investment and investee. FPIs have to file a lot of documents and observe compliance for each process. The new idea is not to dismantle the existing structure, but put in place a unified registration process that will act in all the avenues.

Reports stated that FPIs in which the government of the respective country own at least 75% and those which have appropriate registration in their countries can avail of the benefits of this new system.

Foreign portfolio investors were earlier regarded as prime movers of the Indian stock market. Over the past few years, their ability to influence the market has diminished significantly with the rising tide of domestic money into the equity markets. However, their importance is by no means, insignificant and if the FPIs begin investing again the markets can begin rising. It is true that easy access to markets is not the only or chief trigger to invest in a particular market, but it is a significant enabler nonetheless.