The Hindu Business Line : SEBI move on PN may cast a shadow on investor sentiment: FIIs

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SEBI move on PN may cast a shadow on investor sentiment: FIIs

Our Bureau

Mumbai, Oct 17

A section of the foreign institutional investors believes that the SEBI move to restrict investments through participatory notes (PN) could cast a shadow on the investor sentiments, even as they felt that flows from long-term investors will not be impacted.

But they are in unison in pointing out that SEBI has created an unwarranted panic in the market.

“SEBI could have done this in a better way, avoiding chaos and confusion. Its clarification (on the roll over provision) came after the damage was done” said an official with a leading FII.

“This development (SEBI’s proposal) might cast a shadow on investor sentiment to an extent. But we believe that flows from long-term global investors will not be impacted, given the economic and corporate fundamentals remain robust”, said Franklinn Templeton Investments, in a note to its investors.

“Any sharp outflows will impact the markets over the near term, but our interaction with various global players indicate that key institutional players remain bullish about India’s long term prospects,” the note also said.

Meanwhile, CLSA Asia Pacific Markets said in a research note that “In our view, there could be an adverse impact on longer-term sentiment towards investing in India, if such harsh measures are implemented in their entirety. The experience of Malaysia, which had seen indifferent stock market performance and depressed trading volume for much of the period following imposition of capital controls in Sep-98 does provide some perspective on this.

“We believe that the Government would take cognisance of such apprehensions of the market participants and provide some clarifications or lay down a commitment to facilitation of registration of eligible investors as FII,” the note said. But the institution, however, felt it is unlikely that there will be a final decision until SEBI meets and considers the feedback later in the month.