Mumbai: As the approaching winter weather cools the climes in the northern parts of India, the financial capital is seeing its markets take a cue, and heading south already, albeit before the freeze sets in.

In an announcement on its website, The Securities and Exchange Board of India (SEBI) has said that on Tuesday that after consulting the government, the regulator was recommending changes in policy on participatory notes (P-Notes). It set 20 October as the deadline for comments on the proposals.

SEBI further recommended foreign institutional investors (FIIs) to stop renewing or issuing P-notes on the underlying derivatives with immediate effect. FIIs were still at liberty to issue other P-Notes, limited by the value of notes outstanding relative to their assets under custody in India.

Reuters had reported less than 24 hours ago that the bourses in Mumbai were expected to plummet on Wednesday from the time they opened. With its record breaking rally over the recent days reversed, the stock market regulator SEBI has proposed pressing curbs on flow of foreign funds into shares.

Meanwhile, the markets went into free fall this morning, with the BSE down by over 1,700 points, and the NSE by over 500 points. Trading was suspended for an hour from 10:55 am this morning, as both had hit the lower circuit breakers.

Business news channels have been broadcasting nothing else other than market related news since the time the bourses opened this morning. In a press briefing broadcast across major news channels, finance minister P Chidambaram clarified that this move by SEBI was important in the immediate term to regulate the inflow of capital, and cautioned certain commentators to refrain from making "alarmist" statements.