The Telegraph
Since 1st March, 1999
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Sebi finds nothing foul in FII flows

Mumbai, Oct. 30: The Securities and Exchange Board of India (Sebi) today said there was nothing in the flow of foreign institutional investments to suggest that their money trail led to the wallets of non-resident Indians (NRIs).

The move caps weeks of hair-splitting over the antecedents of the hot money flowing into India through foreign institutional investors (FIIs). The regulator said its data does not warrant, or support, any inference that NRIs have contributed a substantial percentage of the outstanding FII investment.

A recent report suggested NRIs contributed nearly 40 per cent to FII investments, but Sebi dismissed the figures as “conjectural in nature”. Of net investments of Rs 72,965 crore in equity till September 30, 84 per cent came from mutual funds, asset management companies, investment firms, banks and pension funds. In all, 508 entities were registered as FIIs on that day.

“The foreign institutional investors operating in the Indian market are registered and regulated by their overseas regulators in home countries,” Sebi said. “Private companies are generally broad based, but not listed on any exchange. Further, investments made by them are routed through FIIs, which are regulated entities registered here,” the regulator added.

Of these entities, says Sebi, only 12 registered FIIs issued participatory notes outstanding on September 30.

Its findings show the total value of underlying investment in equity represented by participatory notes is Rs 19,125 crore — 26 percent of the FII inflows. What caught Sebi’s attention was the unusually high volume of stock deals executed through these instruments.

“Analysis of participatory notes and reports submitted by 12 FIIs on September 30 indicate that the underlying investments in equity represented by them are diversified across more than 200 shares,” Sebi said.

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