Market remains stable despite zero FII registrations in Q1
By siliconindia   |   Monday, 19 July 2010, 19:43 IST   |    1 Comments
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Market remains stable despite zero FII registrations in Q1
Bangalore: The decline in foreign institutional investors (FIIs) registering with SEBI has gone to the worst scoring nil in the latest June quarter. Despite the waning FII interest in Indian equities, the market players remained unfazed, reports Srividhya Sivakumar and Parvatha Vardhini of Business Line. The slower pace of registrations is generally attributed to SEBI's stricter KYC norms and uncertainty about FII taxation and tax treaties. In an April directive, SEBI had asked new FII applicants to disclose more information about their investment structure in India. Under the new regime, new applicants for registration have to submit an undertaking that they are not Protected Cell Companies (PCCs) and Segregated Portfolio Companies (SPCs). Some industry observers feel that this has resulted in FIIs taking time to re-evaluate their options for their India investments. Kishore Joshi, senior member of the Funds and Regulatory Practice at Nishith Desai Associates, attributed the slow growth in registrations to the time taken by global investors to re-organise themselves. "Since most fund entities registered as broad-based sub-accounts are multi-share class vehicles, the move to broad base each share class, especially where portfolio is segregated, could have slowed down new registrations into India," said Joshi. Punit Shah, Head of Financial Services Tax at KPMG, also attributed the slower growth in registrations to the stricter KYC norms of SEBI. The gross inflows from FIIs into the cash markets remained about the same in the June quarter as in the preceding one, though net flows fell. Atul Gupta, MD, Orbis Financial, attributed it to the "uncertainty" on double taxation avoidance treaties. While it may be difficult to establish the correlation between registrations and inflows, "there undoubtedly is a lead lag effect between the two" explained Gupta.

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