Fiis See India As Safe Haven: Sebi Chief
Foreign institutional investors (FIIs) see Indian stocks as a safer bet compared to other Asian markets, Securities and Exchange Board of India (Sebi) chairman, D R Mehta said yesterday. "The FIIs still consider India a relatively better place for investment because of the regulatory framework and risk management mechanism," he said.
Foreign funds have been net sellers in the country in recent months. Net FII outflows in the last three months totalled $385.2 million. Cumulative net investment by FIIs in India stood at $8.9 billion at the end of January, Sebi data shows.
"The trend is now negative. It may be useful to consider measures to reverse this trend," Mehta told the meeting of Asia Pacific Regional Committee and Enforcement Directors' meeting of the International Organisation of Securities Commissions. Mehta said it was necessary to tighten excessive speculation in currency markets to ward off trouble in stocks. "Since forex markets impact equity market there is urgent need to have a review of the regulation of the forex markets," he said.
He said FIIs were also "comfortable" with India's economic fundamentals and that the country was not rushing into full convertibility of the rupee. "The fact that the country is proceeding towards full convertibility in a measured and gradual manner has also helped it to contain the risk of volatility," he said. Mehta pointed out that 20 out of the 22 exchanges in the country offered screen-based trading and 98 percent of total business was done on-line. Citing recent south-east Asian turmoil, the Sebi chief said since the forex markets impact the equity markets, regulation of the currency markets should be reviewed. There should be a formal arrangement with regulators of different countries to exchange information. 'We have tried this successfully with the commission of Hong Kong, Malaysia and Indonesia', he said.
Despite the turmoil witnessed in the international markets recently, FIIs still considered India as a safe place for investment because of its regulatory framework and risk management mechanism. 'When the major stock markets were closed, Indian markets were operating in a normal way', he added.
In his inaugural address, RBI governor Bimal Jalan emphasised the need for an effective infrastructure for payments and settlement systems for the capital markets. The RBI governor said effective and efficient capital markets require a stable and sturdy infrastructure of payment, settlement and clearing systems and setting up of depositories. 'This infrastructure is the lifeline of securities market as it helps the participants exercise economic choices by prompt and credible transfer of value', he added.
Jalan also emphasised the need for a payments system with principle attributes of accuracy, security, reliability and timelessness and certainty. For this optimal design, the system must address in an integrated manner, the legal, structural, technological and related issues, he said. A draft legislation for setting depositories was under active consideration of the government, he added.
On government securities market, he said a delivery versus payment system was being set up forparties holding SGL and current account with it in Mumbai.