The SEBI has decided to lift some of the restrictions imposed on participatory notes (PNs). The idea is to further facilitate foreign capital flows into the stock market. FIIs have been net sellers to the tune of $9.2 billion so far this year. The question is whether easing the PN regime will, by itself, bring FII flows back. Quite unlikely, considering that the massive deleveraging on Wall Street will take some time to play out fully. Besides, the tightening of the PN regime was done with the primary objective of making large hedge fund investments coming through the PN route more transparent by asking them to directly register with SEBI.   more »

Foreign investors withdrawing a net $9.5 billion from the Indian stock markets this year has made the Securities & Exchange Board of India remove the restrictions on the issue of participatory notes (PNs) by foreign institutional investors, against securities, including derivatives as underlying. Speaking after the board meeting on Monday, Sebi chairman CB Bhave told reporters the board reviewed the FII investment regime. “We are restoring the pre-October 2007 position, when no cap existed,” said Bhave. He also said the framework governing the participation of FIIs in Indian securities markets needs a comprehensive review. “It has been decided to put out a detailed consultative paper on this for comments from the public”, he said. Expert committees have asked for relaxing the rules that govern FII presence in the Indian equity markets.   more »