India’s markets regulator on Friday introduced several measures to ease foreign investor participation, including a trading session to determine closing prices and a proposal to let large foreign investors settle trades on a net basis rather than per transaction.
The overhaul is aimed at making the markets deeper and attracting overseas investors amid accelerated foreign outflows from India amid steep U.S. tariffs, weak earnings and high equity valuations.
Foreign investors often execute multiple buy and sell trades in a day and must currently settle each transaction. Settling only the net value – “netting” in market parlance – would allow those trades to be offset so only the net value is paid, reducing costs and funding requirements.
The Securities and Exchange Board of India (SEBI) would allow netting across two or more stocks, benefiting exchange-traded and index funds. The mechanism would not apply to single-stock intraday transactions.
To align the Indian equity markets with global practices, the regulator approved the phased introduction of a closing auction session (CAS) for determining stock closing prices.
SEBI said it would first introduce such a session for derivatives stocks, followed by other equity segments.
Globally, major markets use a closing auction that pools all buy and sell interest to arrive at a fair closing price, while in India the closing price is currently based on average trading price during the day.
The regulator said CAS will be implemented as a session of 20 minutes from 3:15 p.m. IST (0945 GMT) on all trading days, starting August 3.
Earlier in the day, SEBI also notified the final rules aimed at making it easier for sovereign-backed and overseas retail funds to access the local markets, a move expected to ease access for nearly two-thirds of foreign investors.
