FPI tax not the only reason behind selloff, says Sebi chairman Ajai Tyagi

SEBI Chairman Ajay Tyagi on Friday stated that the recent heavy sell-off in the markets was not solely due to gloomy market sentiments on account of enhanced surcharge on foreign portfolio investors’ (FPI) announced in the Budget but several other factors of the economy coupled with the general slowdown.

Underlining the measures taken (by the government) to contain the further selloff, he said, “There are other reasons pertaining to the economy. Corporate earnings are not improving and there is a general slowdown (in the economy). It is not just because of the FPI sentiment,” Tyagi told mediapersons on the sidelines of the a seminar ‘Onshoring the Offshore’ at the Gujarat International Finance Tec-City (GIFT City’s) International Financial Services Centre (IFSC).

On the overall gloom prevailing in the markets and poor IPO lineup, Tyagi stated that after the IL&FS issue cropped up last year, the debt market scenario had been impacted. “Thereafter, there was some anxiety during the elections but it got over and after that now we are having issue of slowdown in economy globally as well as domestically. But we are hopeful that some pickup will happen in second half.”

During his address, Tyagi said Sebi had recently eased the process for on-boarding of overseas investors and there will be no requirement to meet the ‘broad-basing’ criteria, under which at least 20 investors were required to establish a fund.

Sebi is also in advanced stage of talks with GIFT-IFSC to issue operational guidelines for investment advisors and portfolio management services to begin operations within IFSC. “An important object of the IFSC is to bring trading of Indian products in other countries to India on IFSC platform… The NSE IFSC-SGX connect would enable SGX members and NSE IFSC members to access Nifty products through GIFT IFSC. This would enable a single pool of liquidity of the Nifty contract in GIFT City as opposed to having fragmented liquidity in India and Singapore,” he said.

He also underlined the prospects of other fund management related services other than Alternate Investment Funds (AIFs) which can provide significant boost to onshoring the fund management industry in India. “While many of the current listings have been secondary, there was a scope for primary listings going forward,” he added.

So far, medium-term notes worth over $42 billion, masala bonds worth `5,950 crore and green bonds worth $1.6 billion had been listed.

Tyagi also expressed optimism of a successful rollout of rupee derivatives contracts to be traded on exchanges in the IFSC. “On USD/INR currency products, such products are widely traded in jurisdictions such as Singapore, Dubai, etc. One of the terms of reference of the Task Force was to make suggestions to enable rupee derivatives (settled in foreign currency) to be traded in the IFSC in India. On this terms of reference, the Task Force has given positive suggestions for the introduction of such products in IFSC.”

It is also expected that after new product launches on the exchanges and existing products picking up in volumes, the turnover will increase further. Equity index derivatives market on both the exchanges had picked up with FY19 seeing a turnover of $179 billion across both the exchanges. “The first four months of 2019-20 has already seen a turnover of $183 billion which is quite encouraging,” Tyagi said, adding that commodity turnover in gold futures in the first four months of the current fiscal stood at $15 billion against $52 billion in the last fiscal.