The removal of trade frictions and regulatory uncertainties, as highlighted by Sebi Chairman Tuhin Kanta Pandey, is expected to foster greater stability and predictability, thereby spurring capital formation and investment decisions. This optimistic outlook follows a significant shift in foreign portfolio investor (FPI) sentiment, with these investors becoming net buyers of Indian equities to the tune of ₹7,561 crore on Tuesday, the day after the India-US trade deal was announced. Such inflows offer a much-needed respite from substantial FPI net sales witnessed throughout the previous year and the initial weeks of the current one.
Pandey emphasized Sebi's commitment to facilitating capital movement by providing a consistent, predictable, and frictionless framework for FPIs. He cited ongoing process refinements, including measures like common contract notes, streamlined registration, digital signatures, and the proposed netting of margins, as key steps to ease doing business for foreign investors.
Derivatives Market Stability Assured
Addressing concerns over potential further tightening in the derivatives market following the Union Budget's increased securities transaction tax (STT) on futures and options, Pandey provided reassurance. He stated that Sebi is not contemplating any additional regulatory measures on derivatives at present. The regulator, he noted, approaches derivative markets methodically, based on data and inputs, and the existing framework will continue to operate. This stance aims to prevent undue speculation while maintaining market depth.
Corporate Bond Market Development Efforts
On the corporate bond market's growth, Pandey detailed Sebi's active engagement with industry participants and investors. The regulator is focused on improving primary and public bond issuances, enhancing secondary market liquidity, increasing overall investor participation, and expanding access to bond products. Current structural challenges include a heavy skew towards highly rated issuers, fund-raising dominated by financial institutions, a predominance of private placements reducing transparency, and a shallow secondary market. Sebi is exploring measures like a market-making framework to ensure continuous two-way quotes and exploring derivatives on corporate bond indices and total return swaps for efficient risk management. Corporate bonds currently represent about 16% of India's GDP, significantly lower than comparable economies like South Korea and Malaysia. Despite efforts to boost retail participation, awareness remains limited. 
