OVERVIEW: 

• SEBI, the Securities and Exchange Board of India, recently announced a significant policy change regarding Foreign Portfolio Investors (FPIs) operating out of the Gujarat International Finance Tec-City (GIFT IFSC)

• SEBI has permitted FPIs based out of GIFT IFSC to aggregate up to 100% of their Non-Resident Indian (NRI) corpus contributions.

• The decision is expected to attract more FPIs to operate from GIFT IFSC by providing them with greater flexibility and ease of conducting business.

INCREASED NRI PARTICIPATION:

• Previously, there were restrictions on NRI involvement in FPI investment vehicles.

• This new rule allows them to play a much larger role, potentially attracting a significant amount of NRI capital into the Indian stock market.

ENHANCED INVESTMENT OPPORTUNITIES:

• This opens doors for NRIs and OCIs to invest in Indian securities more directly.

• They can now participate in FPI structures established specifically within the GIFT IFSC framework.

BENEFITS FOR INDIAN MARKET:

• The increased participation from NRIs and OCIs is expected to provide a much-needed boost to foreign investments in India.

• This can lead to greater liquidity and stability in the Indian financial markets.

FOCUS ON TRANSPARENCY:

• SEBI has mandated that no single NRI, OCI, or resident Indian can contribute more than 25% to the corpus of a newly registered FPI.

• This ensures transparency and avoids any single investor wielding undue influence.

CONCLUSION:

• SEBI’s decision to allow up to 100% aggregation of NRI corpus contributions for FPIs based out of GIFT IFSC is a significant step towards enhancing the competitiveness and appeal of India’s international financial services sector.

• This move is likely to have positive implications for market participants, investors, and the broader economy, positioning GIFT IFSC as a pivotal player in global finance.