FPIs believe in India's long-term growth story: Sebi Chairman Pandey

Sebi chief outlines reforms in IPOs, F&O, and cybersecurity, stressing trust, technology, and calibrated regulation over new powers

For Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey, trust is the cornerstone of India’s fast-expanding capital markets — and it must be earned every day through action, not announcement. In a fireside chat with Tamal Bandyopadhyay, he talks of various aspects of Sebi’s functioning. Edited excerpts: 

At your very first board meeting, you spoke about building public trust and sorting out conflict of interest. How do you settle issues and conflicts — not just in the market but also within Sebi? Where are we today on these issues? 

It’s important to understand that Sebi is an institution. It has been nurtured and developed by several of my predecessors, along with industry and market participants, through collaboration. Today, Sebi has a strong reputation not only in India but also overseas. 

 

Trust is critical, both internally and externally. It does not come from a single measure — there is no magic wand. It stems from a series of actions: Our language, how we communicate, our regulatory framework, and a fair and judicious application of regulations. 

Earlier there was concern over whether we had a robust internal framework on managing conflict of interest. We had set up a high-level committee on this aspect. The committee has been deliberating on the matter and engaging with several internal and external stakeholders. I expect its report to be submitted in a few days, possibly by November 10. We will take the next steps, based on its recommendations. 

We have never had any five-year period during which foreign portfolio investors (FPIs) have sold so much. Is it only about valuation, or is there something else? 

On the basis of my interaction with FPIs and other participants in foreign markets, I find their confidence in India remains high. They believe in India’s long-term growth story and also see short-term opportunities.

 

FPIs’ market capitalisation in India is about $900 billion. They allocate across global markets and assess where they can get the best returns. So, an outflow of $45 billion in the past year — with some months of positive flows and some negative — must be seen in proportion. The outflow of $45 billion on a base of $900 billion is not very significant.

 

That said, FPIs have given feedback on improving access, simplifying processes, and addressing pain points. We are working on those. We have simplified and digitised FPI registration.

 

India has one of the largest primary markets, but you recently reduced the size of a minimum public offer (MPO) in an IPO and the minimum public shareholding (MPS) requirement for listed companies. Is there a disconnect?

 

Let me clarify: We have not diluted the norms on MPS. MPS remains at 25 per cent — unchanged. What we examined was the MPO and the time allowed for companies to achieve MPS.

 

The markets have expanded. After the IPO of the Life Insurance Corporation (LIC), we began discussing companies with a ₹6 trillion market cap coming to the market.

 

Strict timelines on MPS can act like a Damocles’ sword, potentially hurting minority shareholders due to price volatility. So, we took a realistic view of what the market can absorb. After extensive consultations and excellent feedback, we introduced multiple pathways to achieving compliance on MPS and MPO, without compromising on investor protection.

 

MFs enjoy a tax advantage over portfolio management services and alternative investment funds. That's one side of the story. On the other hand, while the Reserve Bank of India is paving the way for banks to lend more to earn more interest income, Sebi is limiting the sources of MF income. Yes, I am referring to the new discussion paper on the expense ratio ...

 

MFs are critical for retail participation. We have 56 million unique investors. The industry has grown rapidly but is still 20-25 per cent of India’s gross domestic product (GDP). In advanced economies, MFs’ assets under management are 80-85 per cent of GDP.

 

MFs must grow faster because they provide a safer way for retail investors to enter the market and promote long-term investing. Their tax status is aligned with that structure — it is a pass-through model.

 

The MF industry has grown significantly and become more professional. We cannot constrain it. That is why we introduced options like specialised investment funds and other reforms, allowing more activities with appropriate risk segregation. Simplifying regulations has been a key objective. Some proposals on the fee structure stem from the need for greater clarity, fairness, and transparency.

 

Sebi research shows 90-93 per cent of individual investors lose money in F&Os. There has been so much discussion on easing out weekly F&Os. When will we see that?

 

This is a sensitive subject and requires thoughtful handling. We adopted a calibrated approach and implemented a series of measures to improve the market after five rounds of consultation. Initially, we received diverse views, which we reconciled.

 

Some measures have taken effect; others will kick in as late as December 1. Some began in October, some in July, and more are scheduled for May 2026. We have introduced guardrails — limiting expiries to only two days a week and one index per day — to curb irrational exuberance among retail investors less aware of the workings of the market. Statutory warnings have also been included on the trading screen.

 

At the same time, many market participants actively use derivatives products. We cannot abruptly shut down the market. Therefore, any further steps will be released for public consultation. Stakeholders can evaluate the data and provide feedback before we proceed.

 

Will the IPO of the National Stock Exchange see the light of day during your tenure?

  Of course, unless you want my tenure to be very short.

 

Can you take us through Sebi’s “30-second cyber-security check”?

 

This is an important initiative by Sebi. With support from market participants, banks, and others, we have developed a unique system — the first of its kind globally.

 

India is a global leader in Unified Payments Interface and digital public infrastructure. With 45-50 per cent of the world’s digital transactions happening in India, convenience is high, but that also enables fraudsters. Our objective is to end the ease of doing fraud. We must protect millions of investors at scale.

 

Many people spend time choosing vegetables or comparing products, but not even 30 seconds checking if their securities account is secure. The “30-Second Check” on Sebi’s Saarthi app enables users to quickly verify bank-account linkage, demat-account security, MF statements, the validity of the advisor or intermediary, and whether any unauthorised transfer or pledge has taken place.

 

This is a systemic, preventive effort — unique globally. The aim is for current and potential investors to be aware so that they do not lose money. Market risk is understood — but fraud risk must be avoided.

 

What is the latest on finfluencers?

 

We are doing around 5,000 takedowns every month, and have taken down over 100,000 pieces of content from platforms with support from Google, Meta, and others. With better tools and platforms deploying artificial intelligence more effectively, we should be able to act even more forcefully.

 

Sebi has gained more teeth over the years. Do you need additional powers?

 

We have adequate powers. We must use them judiciously, sensibly, and consistently. We also need to keep upgrading our surveillance tools — which we are doing. If we have done well, we must do even better. If we keep exercising these powers responsibly, we will continue to maintain public trust in the capital markets — because as a watchdog, that is our duty.

 

You recently launched an e-office in Sebi. Is that correct?

 

That’s correct. Sebi was, I admit, late in adopting it. This will strengthen efficiency in the organisation. I can say we are fortunate to have some of the finest minds at Sebi.