The Securities and Exchange Board of India is likely to clear the way for the introduction of more products in Indian stock markets as it seeks to put curbs on the controversial participatory notes (P-notes) at its board meeting on Thursday.
The Sebi think-tank is of the view that more and more sophisticated products should be available onshore to ensure that Indian capital markets attract different categories of investors, even while it wants to discourage all kinds of offshore products based on Indian stocks and derivatives, according to sources.
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Sebi think-tank wants more sophisticated products onshore to attract different categories of investors Delivery-based settlement in the F&O segment may find a mention at the meet Proposals for allowing short-selling in cash markets and stock lending and borrowing for institutional investors may also feature |
Proposals for allowing short-selling in cash markets and stock lending and borrowing for institutional investors have been pending for some time. "The object is to ensure that Indian capital markets are not exported outside the country," said a source.
To discourage companies from accessing the GDR route, the Sebi had allowed a new product, qualified institutional placements last May, which has now more or less eliminated GDR issuances.
All major proposals to curb P-notes, including the 18-month timeframe for winding up the P-notes exposure in the derivatives market, are likely to be approved without any changes, said sources.
The delivery-based settlement in the F&O segment, a key proposal that was pending before the Sebi for a while now, might find a mention, after the board debates the issue on Thursday, said sources.
Currently, settlement in the derivatives segment is done in cash and a changeover into the delivery-based settlement may add more stability to the markets.
There could also be some minor tinkering in other proposals, which were put out for feedback on the evening of October 16.
Sources said the board might debate whether to allow PN exposure in index-based futures and restrict the ban only to stock futures and options contracts.
Though the outcome may be known only after the board meeting on Thursday, it is likely that the Sebi would stick to a curb on both stock-specific and index-based derivatives.
The National Stock Exchange's Nifty futures contract is the most popular derivative contract with an average daily turnover in excess of Rs 30,000 crore (Rs 300 billion).
There are 200-odd stocks eligible for F&O on the NSE alone, where the average volume was Rs 63,000 crore or Rs 630 billion (stock futures) and Rs 2,300 crore or Rs 23 billion (stock options).