SEBI opens PN taps for foreign funds as market sheds 700 pts

06 October 2008

Mumbai: The Securities and Exchange Board of India (SEBI) has done away with the 40 per cent cap on investment through offshore derivative instruments, popularly known as participatory notes (PNs), as the stock market regulator announced a slew of measures to ease market volatility and boost foreign fund flows into bourses.

The announcement comes after the Bombay Stock Exchange sensitive index plunged over 700 points, dipping below 12000 points, amidst mayhem on the stock markets across the world.

SEBI chairman CB Bhave said the stock market regulator would also take up a comprehensive review of rules governing foreign participation in the market.

SEBI had, last year, put restrictions on the issuance of PNs as these helped foreign investors remain anonymous while excess liquidity of foreign funds had made the market unmanageable for the regulator.

''We are restoring the pre-October 2007 position. At that time no cap existed,'' Bhave said, adding, PN issuance has come down substantially amidst gloomy market conditions.

The SEBI board, which reviewed the position with regard to registration of FIIs and sub-accounts in the last one year, said 397 FIIs and 1,160 sub-accounts have been registered since 31 October 2007.