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Hedge funds are threatening to pull investments from India, citing controversial new rules introduced in response to last year's short-selling attack on India's largest company, Adani.
The rules, by India's market regulator Sebi, require large foreign investors, including hedge funds, to disclose all end investors who bet on Indian stocks, making it a “significant practical risk” for the funds. The fund argues that this would pose “hardships” and constitute a significant departure from international practice. .
Large global banks were also concerned that they would be caught out by the previous version of the rules. Banks including JPMorgan, Goldman Sachs, BNP Paribas, Société Générale and UBS wrote to Sebi in January that providing investor information to regulators would be “very difficult” and “subject to significant legal requirements.” “There are legal and regulatory reasons.” The bank declined to comment.
But their concerns were partially assuaged after regulators clarified that banks would carve out many of the funds they trade, making it less likely that bank customers would fall foul of the rules.
Officials from two of the banks that wrote to Sebi in January told the Financial Times that they had stopped objecting after talking to the regulator. Last month, Sebi also proposed exempting university endowments and donations from disclosure requirements.
However, hedge funds are still vulnerable to new rules requiring foreign investors with assets of $3 billion or more in the Indian market to disclose “in-depth details” of the end investors who benefit from their investments. Are concerned.
This includes hedge funds using prime broking services, where the bank itself has surpassed the $3 billion threshold. Also eligible are investors who allocate 50 per cent of their Indian portfolio to any one company.
“This change poses serious practical difficulties. [foreign investors] We want to invest legally in India,” London-based hedge fund trade body AIMA wrote to Sebi this week.
The rules are part of Sebi's efforts to better understand the ultimate investors buying Indian stocks.
India's stock market regulator released an explosive short-selling report on Adani Group last year, after it wiped out the value of the group's listed companies and billions of dollars in the net worth of founder Gautam. Pressured to respond to uncertain foreign portfolio investors. Adani.
Sebi's efforts to unmask foreign investors are also driven in part by broader government efforts to closely track money coming into India from neighboring countries, including China.
India introduced rules in 2020 that make it harder for China and Chinese-backed companies to invest, requiring foreign investors from countries that share land borders with India to obtain government permission before entering India. Established.
Electric car maker BYD and Apple supplier Luxshare are among the Chinese companies whose expansion plans in India have run afoul of regulations.
