INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Foreign portfolio investors have long been a key driver of Indian stocks
But a large part of this money has an Indian connection: non-resident Indians (NRIs), overseas citizens of India (OCIs) and persons of
asked Category II and III FPIs to provide list of their beneficial owners (BO) in a prescribed format within six months
hard to get the proposed changes to KYC norms withdrawn
They claim some $75 billion FPI money will move out of India because of the regulatory move.
FPIs held about 23.8 per cent stake in BSE200
stocks, worth $408 billion as of June 30
This is more than double of $177 billion of BSE200 stocks they held in June 2012.
Sebi remains unmoved, and says the same is necessary under
the prevention of money laundering norms
It appears that that this drive is to protect investors and to have a more regulated market
Where NRIs are the beneficial owners, SEBI may want such investors to invest directly in India using the Portfolio Investment Scheme route
disqualification of a number of foreign funds majorly controlled by non-resident Indians (NRIs), overseas citizens of India (OCIs) and
persons of Indian origin (PIOs).
A large outflow at this stage may put tremendous pressure on the rupee, which is already down over 10 per
cent this year, and also domestic stocks
The institutional category has been net sellers on Dalal Street to the tune of Rs 4,900 crore so far this year
Last month, Sebi asked these funds to either square off positions or change ownership within six months from April 10, which is now revised
The regulator had also assured FPIs that the issues raised by them will be looked into by an expert panel.
The decision came after Sebi
received representations from market participants, seeking review and additional time for complying with the guidelines.
Analysts say the
matter could at the most generate a knee-jerk reaction
But they themselves are divided over the circular; some find it ambiguous
What does the circular sayThe Sebi circular says beneficial owner (BO), who ultimately owns or controls an FPI should be identified in
accordance with rules on prevention of money-laundering.
It says foreign funds where one or more NRIs, OCIs and PIOs have controlling
ownership interest of 25 per cent in case of a company and 15 per cent in case of partnership firm, trust unincorporated association of
of 10 per cent for identification of BO.
For this, the market regulator has asked Category II and III FPIs to provide list of their
eligible to run these funds
to manage a fund that invests in India, he asked.
Forget NRIs, even OCIs or persons of Indian origin cannot be a fund managers, which was
very strange, because essentially you can never get rid of this tag, because you were born here and you are a person of Indian origin,
At the time of writing of this report, the stock indices were down for fifth day running while the rupee ruled at a low of 71.34 against
destination for foreign investment flows, foreign investors will figure out other ways and means in terms of additional layering or in terms
Besides, investors are bringing in money because they do see merit of investing in India
that there are indications that there would be some changes incorporated in the reporting requirements to take cognisance of the issues and
concerns raised by FPIs, especially having NRI linkages
requirement may not be able to take additional positions in the Indian securities market
requirements, the expert said.
