📰New Regulations Announced Today

Hello. India’s Securities and Exchange Board of India (SEBI) held a board meeting today, and we’ll tell you how this impacts you. Then, we’ll close with Gupshup, a round-up of the most important headlines.

BTW: Do you know how many passengers Indian Railways — the administrator of Asia’s largest network of trains — transports every day? (Answer at bottom)

Markets

Read here for an appendix on the above.

Explainer

SEBI Announced New Regulations Today, Holds on Tightening Futures and Options Rules

India’s chief securities regulator, the Securities and Exchange Board of India (SEBI), held a board meeting today (Sept 30) to announce a series of new regulations, while deciding to delay implementing much-anticipated rules on the futures and options market. The new reforms are below:

New Asset Class for High Networth Individuals   SEBI has approved a new asset class, called “Investment Strategies,” aimed at high-risk investors. The asset class was created to bring regulation to unauthorized investment schemes that promise unreasonable returns at very high risks. Investors must put a minimum of ₹10 lakh ($11,931.56) across strategies within the same asset management company. The new regulated product will function similarly to a systematic investment plan, and will not allow leverage and limit exposure to derivatives.

Offshore Derivative Instruments (ODI) Disclosures   SEBI has tightened regulations on ODI disclosures, requiring Foreign Portfolio Investors that offer such products to report relevant information about their subscribers/investors and portfolio-level information to depositories.

T+0 Settlement & Block Deals   SEBI will extend T+0 settlement to the top 500 stocks, enabling brokers to offer a faster trading cycle. An additional block deal window will operate from 8:45 to 9:00 a.m., complementing the existing T+1 system. T+0 denotes same-day trading (where T is the trade date and 0 indicates the number of days to clear the trade). Block deals refer to the simultaneous execution of a large number of trades (exceeding a specific threshold) at a pre-negotiated price, primarily used by institutional investors.

Faster Rights Issues   SEBI has cut the rights issue timeline to 23 days, down from an average of 317, making it faster than the preferential allotment process. Stock exchanges will now handle approvals, streamlining the process for issuers. A monitoring agency will oversee all rights issues, regardless of size. A rights issue is a way for companies to raise capital by offering existing shareholders the right to purchase additional shares at a discounted price, typically in proportion to their current holdings.

Disclosures   Listed companies now have three hours, instead of 30 minutes, to disclose board meeting outcomes after trading hours. They also have 72 hours to disclose litigation claims, provided the information is stored in a digital database.

Trading Modes   Starting February 2025, Qualified Stock Brokers (QSBs) must offer either a UPI-based blocked amount system for secondary market trades or a 3-in-1 trading account option, giving clients more flexibility and improving their investment experience. QSBs refer to brokerage firms that allow customers to execute trades, offer investment advice, and/or help clients manage their money. UPI-based refers to the use of the Unified Payments Interface (UPI), a real-time payment system developed by the National Payments Corporation of India (NPCI). UPI allows users to link multiple bank accounts to a single mobile application and make instant payments between bank accounts using a smartphone. This type of account integrates three services: a bank account, a demat account (for holding securities in electronic form), and a trading account (for buying/selling securities). The 3-in-1 setup makes it seamless to transfer money between accounts for trades, manage securities, and track investments all in one place.

Insider Trading   SEBI expanded insider trading regulations to cover individuals indirectly associated with the market, such as household members or distant relatives of connected persons.

Mutual Funds Lite   SEBI introduced MF Lite, a simplified framework for passively managed mutual funds. The framework lowers barriers for new entrants by easing requirements on net worth, track record, and profitability while reducing the compliance burden for trustees.

What’s Next for Futures and Options   SEBI Chairperson Madhabi Puri Buch’s tax hikes and promises for reform have already led to a decline from February’s peak trading volume of $6 trillion — still, the futures and options sector has grown 40-fold since 2019, a cause of stress for regulators as retail investors have lost $210 billion in the last three years on speculative trades. The expected reforms include higher margin requirements, stricter position limits that prevent traders from taking outsized bets, enhanced risk disclosures, and increasing the eligibility criteria for retail traders, which could include providing financial literacy through certification.

Macro

• India gets its best rainy season in four years, with crops receiving 934.8 mL of rain over four months, a 7.5 percent increase from the average (BBG). The additional rain will serve as a boost in incomes for farmers and for the overall economy.

• India eases duty on rice exports (​​BBG). The government allows white rice export as long as the exports are above a price floor and cuts duty on parboiled rice exports to 10%.

• India’s current account deficit widens to 1.1% of GDP to $9.7B after a surplus in the previous quarter (Livemint). It’s widening due to a rise in the merchandise trade gap which came in at $65.1B compared to $56.7B, representing almost the entire deficit.

Equities

• Hyundai, Swiggy, Vishal Mega Mart gets SEBI approval for IPO. Hyundai will sell around $3 billion in new shares and is expected to IPO before Diwali (Friday, Nov 1) (Fortune). Swiggy and Vishal Mega will sell a collective $2 billion in shares. Listings in India have already exceeded $8 billion in 2024 thus far.

• Sensex and Nifty fell in the last 2 sessions due to global cues (Livemint). Rising tensions in the Middle East, lingering valuation concerns, and Chinese stimulus made caused capital move to the US for safety and China for speculation.

Alts

• Kenya is looking to issue bonds rather than accept an unsolicited bid from Adani for airport expansion that sparked protests(BBG). Adani’s bid to develop the Kenyan airport was met with protests and lawsuits citing that the $1.85B offer was too meager with tight covenants as compared to a sovereign bond.  

• Oil product exports from India rise due to African demand (BBG). European refinery shutdown is causing unsatisfied demand in Africa which is being fulfilled by Indian refiners, due to greater profit margins from the demand side now. 

Policy

• Modi tweeted at Israel’s Netanyahu saying that regional escalation should be avoided for hostage release (Livemint). Modi and the Indian government is being tapped more for the resolution of the conflict, post a meeting between the two leaders. 

• SEBI approves a new asset class for high net-worth investors (Livemint). With a minimum investment, individuals can now buy into funds with riskier long-short equity strategies than in the past. Investors would need $12,500 minimum to be eligible.

Oh, and Indian Railways transports 23 million people every day, about the population of Australia, on its 41,631 miles of rail.

See you next week.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1 USD = 83.72 Indian Rupee