A day after market regulator SEBI tightened norms for P-Notes, the government said it was too early to assess the impact but favoured steps that control capital flows.
NEW DELHI: A day after market regulator SEBI tightened norms for Participatory Notes, the government on Friday said it was too early to assess the impact but favoured steps that control capital flows without hurting investment.
"I have said one of the concerns is very sharp increase in capital flows. Without hurting investments, we will like to take some measures to moderate the inflows. Some measures have been taken by SEBI. We will have to wait and see what impact do they have," Finance Minister P Chidambaram said here.
However, Chidambaram refused to answer repeated queries on whether RBI or the government would take some more steps to moderate capital flows.
When asked about a surge in the stock markets Friday, the Finance Minister said: "We cannot take stock (of situation) every day."
The benchmark equity index Sensex regained the 19,000 level Friday on brisk buying activity.
The idea of SEBI's move on P-Notes was to moderate capital flows. As a by-product, SEBI also achieved the objective of greater transparency, said Chidambaram.
SEBI announced new rules on Thursday that prohibit FIIs and their sub-accounts from issuing fresh derivatives-based P-Notes and require them to wind up current positions in 18 months.
It also imposed curbs on PNs in the spot markets by limiting them to 40 per cent of assets under custody of FIIs.
Besides, SEBI also made registration of FIIs and their sub-accounts permanent and they would not have to renew it after every three years as is the case now. The market regulator also allowed unregulated pension funds, education funds and others to register as FIIs.
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