New Delhi, Oct. 27 (PTI): Market regulator Sebi is exploring the possibility of allowing select hedge funds to enter the stock market directly, its chairman M. Damodaran has said.

Allowing hedge funds to invest in stock market directly “is something we are working on at this point of time”, he told a PHDCCI seminar here last night.

At present, these funds are invested in India through offshore derivative instruments called participatory notes (PNs), which are not registered foreign institutional investors. He said he was for facilitating the entry of those funds, which have strong management, better track record and sound investment pattern.

Where comfort level is higher, he said direct entry of hedge funds should be facilitated rather through PNs.

He, however, said one should be careful while allowing them by properly checking their profile and investment pattern.