SEBI Eyes Trading Overhaul As Foreign Investors Pull Out More Than USD 50 Billion

The Securities and Exchange Board of India (SEBI) is weighing changes to trading regulations to curb foreign fund outflows and strengthen India’s representation in global stock market indexes, according to sources familiar with the discussions, Reuters reported.

The proposed measures include reducing collateral requirements for cash equity transactions and promoting longer-duration derivatives contracts. For highly liquid stocks, the changes could lower upfront capital requirements by 15% to 20%. The reforms come as foreign ownership of Indian equities has fallen to a 17-year low. Foreign investors sold more than USD 50 billion of Indian equities between October 2024 and June 2026, according to NSE data. India’s weight in the MSCI Emerging Markets Index has also declined below 12%, from 21% in September 2024.

SEBI is also working to expand stock lending and borrowing and make short-selling easier. The changes are expected to be introduced within nine months after consultations with market participants.

The regulator is also seeking to increase institutional participation in derivatives and reduce trading costs for overseas investors.