Mumbai: In order to encourage more long-term investors pick up equity in bourses, market regulator Sebi on 5 September proposed hiking individual cap on holdings in a stock exchange to 15% from the existing 5% for certain category of investors.
These investors are stock exchanges, depositories, clearing corporations, banks and insurance companies.
However, any other shareholder will continue to hold up to 5% of the equity in a stock exchange, Sebi proposed in its discussion paper, while inviting comments on the same by 19 September.
The proposal came as some investors in NSE and Over-the-Counter Exchange of India hold more than 5% and have been asked to dilute their holding to 5%, as required under the present regulations.
However, these investors have submitted that they are facing difficulties in bringing down their equity to the present cap of 5%.
Sebi has received communication from certain quarters that the present limit of 5% is acting as a hindrance in attracting long-term investors in exchanges.
“It is a good consolidation. With the hike in investment cap for individual investors, there would be more money in the exchanges and with higher shares these investors can give better guidance,” SMC Global Vice President Rajesh Jain said.
The cap on individual entity was capped at 5% after corporatisation and demutualisation of stock exchanges.
Demutualisation refers to segregation of trading and ownership rights by which equity of brokers have been brought down to 49% in stock exchanges in India. Also, foreign investment is allowed up to 49% with FDI capped at 26% and FII limited to 23%.