India’s securities regulator, seeing foreign investments push its stock markets to dizzying heights, has moved to make such transactions more transparent.

Among new rules announced Thursday, the Securities and Exchange Board of India will limit the use of participatory notes. These are instruments issued by registered foreign institutional investors to allow foreign investors participate in the market without having to register with Indian regulators.

When a draft of these rules became public Oct. 17, the main stock market in Mumbai, which had climbed to more than 19,000 points in recent weeks, took a huge hit on concerns the overseas investors would withdraw their money. But the markets have since recovered on the strength of India’s booming economy.

Foreign investors are betting the economy will continue to improve. But SEBI officials said they acted because the huge capital inflows also have raised serious security concerns.

In other changes, only those entities regulated in their countries’ of registration will be allowed to register as foreign institutional investors in India.

On the plus side, pension funds, endowments and university trusts can enter the markets as registered foreign investors.  // Copyright 2007 by United Press International





Publication date: 26 October 2007   

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