Sebi proposes ‘netting of funds’ for FPIs...

AKSHAYA BHANSALI, MANAGING partner at Mindspright Legal, said that the new mechanism’s benefit is primarily operational and limited to specific situations such as index rebalancing or large portfolio adjustments.

- AKSHAYA BHANSALI, MANAGING

Market participants have long highlighted the inefficiencies of gross settlement, particularly during high-volume trading days and issue of allowing netting for FPIs has been under discussion for several years, Bhansali added.

On the other hand, the move is expected to increase the overall returns for FPIs and attract more foreign investors in the Indian equity market, said Vipin Kumar, assistant vice president of equity research and head of derivatives and technical at Globe Capital Market. The sale proceeds can be used to fund the purchasing obligation and this will also reduce the foreign exchange conversion slippages, he added.

What is netting mechanism?