The recent outflows from foreign portfolio investors (FPI) should not be solely attributed to the SEBI circular on granular disclosures, according to a senior official. The circular required FPIs with assets over ₹25,000 crore or with a concentration criterion of more than 50% of their AUM invested in a single corporate group to provide additional disclosures or exit the country by September 9.
However, the official clarified that FPI outflows post-September cannot be directly linked to this circular. Additionally, no FPIs have been mandated to reduce positions or exit under the ₹25,000 criteria to prevent circumvention of Press Note 3 stipulations.
The official also highlighted the growth in the F&O ecosystem, with SEBI considering tactical and structural steps to reduce the risk of manipulation across cash and derivative markets. The regulator had announced measures in October to curb overtrading in index options on expiry days, and is now exploring ways to enhance the F&O ecosystem for improved price discovery, market depth, and risk management.
In terms of Alternative Investment Funds (AIFs), the official noted a significant increase in investment commitments, showcasing growth similar to the mutual fund ecosystem. AIFs now operate largely in dematerialized form, benefiting investors and enhancing regulatory visibility.
On the supply-demand front, there had been concerns about insufficient fresh paper supply by listed companies compared to rising flows in the secondary market. However, in FY25, the supply of fresh paper by companies surged to an all-time high of over ₹2.9 lakh crore, narrowing the gap between supply and demand and supporting capital formation in the markets.
Overall, the official emphasized the need for robust governance in market infrastructure institutions, steps to strengthen the independence of clearing corporations, and initiatives to promote the growth of the AIF and Angel Fund ecosystem. The regulatory focus remains on ensuring market integrity and investor protection while fostering a conducive environment for capital formation.