‘Preposterous’ To Say FPI Rules Will Lead To $75 Billion Outflows: SEBI

The market regulator has come out strongly against claims made by a body of asset managers that its tighter rules on ownership of foreign funds could lead to massive outflows from the Indian markets.

The Securities and Exchange Board of India said it is ‘preposterous’ and irresponsible to say that the rules could lead to a $75-billion outflow by foreign portfolio investors because of its April circular.

In an April 10 circular, SEBI barred non-resident Indians, persons of Indian origin and overseas citizens of India from being “beneficial owners” or “in control” of foreign portfolio investors. A fund manager is considered to be in control if the beneficial ownership of a foreign fund can’t be defined—like in case of a diversified investor base.

SEBI on Aug. 21 extended the deadline to comply with the regulations by the end of 2018.

Markets plunged on Monday after a body of asset managers—Asset Manager’s Roundtable of India—said these restrictions will lead to unwinding of $75 billion worth of foreign funds managed by Indians. The rupee closed at 71.22 to the dollar after touching a record low of 71.25, while the 10-year benchmark bond yield rose to 8.00 percent, highest since June 11. The broader NSE index ended 0.8 percent lower reversing gains in the final hour of trade.