SEBI panel seeks to ease gross F&O index exposure limit

SEBI's working group has proposed easing gross derivative exposure limits for foreign portfolio investors (FPIs) from 100% to 150% of AUM. The recommendation aims to enhance liquidity and participation in India's derivatives market while maintaining risk controls. If implemented, FPIs could increase hedging and arbitrage strategies, potentially boosting daily F&O turnover by 15-20%. The proposal includes safeguards like additional disclosure for exposures above 100% and quarterly reporting. This reform follows FPIs' long-standing demand for greater flexibility in managing India portfolios amid rising global volatility. SEBI will finalize norms after stakeholder consultations, with implementation expected by Q3 FY25. Market participants anticipate this could attract $2-3 billion additional FII flows into derivatives.