Certain ambiguous, unscrupulous and bogus FIIs that participate in our stock markets and expose it to wild swings, are now departing from India after the capital market regulator -  Securities and Exchange Board of India (SEBI) enforced a ban (in April 2010) on certain Foreign Institutional Investor (FII) investment structures.

 

Earlier these “junk” FIIs took large exposures in the Indian capital markets by making use of their complex structures; but as the capital market regulator became vigilant about the impact of their (FII) activity a number of them have surrendered their registration, while a number of sub-accounts have converted themselves into registered institutional investors.

 

According to SEBI, 24 FIIs and 130 sub-accounts have applied for surrendering registration after the new norms. And in all, 188 non-compliant FIIs and 336 sub-accounts are barred from taking fresh positions in the Indian capital market.

 

We believe that we will witness more of the “junk” FIIs surrendering their memberships in the coming days, as overseas investors serious about investing in India will restructure and seek direct registration. We also think that SEBI’s decision of April 2010 (asking FIIs to stop using complex structures) is a step taken in the right direction to weed out the “junks”, and encourage only the serious one’s to stay (who look at India as a promising investment destination). However in our opinion, the continuance of the vigilance adopted by SEBI, is necessary in order to identify the loopholes (if any), thus making it better for the capital markets in the long-run.

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