Sebi may allow FPIs to directly trade in capital markets

With an aim to make it easier for overseas investors, regulator Securities and Exchange Board of India (Sebi) is considering allowing some categories of Foreign Portfolio Investors (FPIs) to directly trade in Indian markets, starting with debt segment. Currently, FPIs trade in Indian markets through domestic stock brokers, who gets a significant chunk of their revenues from such investors. The issue is likely to be discussed in the board meeting of Sebi later this month, sources said.

The regulator may float a consultation paper in this regard and the final decision will be taken after taking into account views of all the stakeholders. Under the proposed norms, Sebi may permit overseas investors to directly trade in capital markets. It has proposed to begin with allowing them to trade in debt markets and gradually access to equity markets may also be permitted.

The norms might be applicable for Category-I FPIs that include sovereign wealth funds and central banks as well as Category-II FPIs, which include mutual funds and banks.

However, hedge funds, individuals and other high risk foreign investors may not get this facility.

The move is aimed at boosting foreign inflows in Indian capital markets. However, it will have negative impact on domestic brokerage houses as they will lose out on revenue.

Currently, investments made by Sebi-registered FPIs in domestic capital market stood at Rs 11.5 lakh crore. This include Rs 8.45 lakh crore in equities and Rs 3.06 lakh crore in debt.