SEBI's Decision on FPI Disclosure Thresholds
The Securities and Exchange Board of India (SEBI) has decided to increase the threshold for granular disclosures by Foreign Portfolio Investors (FPIs) to ₹50,000 crore. This strategic move is expected to boost capital inflows and reduce compliance burdens for genuine investors amidst persistent selling by FPIs.
Key Changes and Reasons
- Increased Threshold: The FPI investment threshold for granular disclosures has been raised from ₹25,000 crore to ₹50,000 crore.
- This change is attributed to the doubling of cash equity markets over recent years.
- FPIs investing more than ₹50,000 crore will need to disclose details of beneficial ownership and other investment specifics.
- Regulatory Intent: SEBI aims to facilitate investment in Indian markets without deterring investors.
- The amendment addresses the compliance burden and seeks to prevent stock price manipulation and flouting of public shareholding norms.
Market Impact and Reactions
- Expected Outcomes:
- Enhanced capital inflows and market depth.
- Improved transparency and simplified compliance for mid-sized and small FPIs.
- Expert Opinions:
- Mahavir Lunawat, chairman of the Association of Investment Bankers of India, highlighted that the decision encourages participation in Indian equities while significantly reducing compliance burdens.
- Siddharth Shah from Khaitan & Co. noted that India was possibly the only emerging market with stringent granular data requirements, leading to portfolio dilution by FPIs to avoid high compliance levels.
Overall, SEBI's decision is perceived as a pro-growth and pro-investment approach, maintaining a balance between regulatory oversight and market appeal.
