The huge inflows have pushing up the rupee’s value against the dollar. The market ended flat today amidst speculation that the regulator would come out with some measures to stop the bull frenzy.

The year-on-year increase in ODIs, the anonymity that the ODI provides to investors, and the copious inflows into the country from foreign investors have been engaging the attention of the Government and regulators such as the Reserve Bank of India and Sebi.

“This has been a topic of discussion ta many fora such as the High Level Committee on Capital Markets (HLCC) and various committees set up by the government and regulators,” the Sebi paper said. The committee had earlier made certain recommendations which included issuance of PNs only to regulated entities subject to KYC requirements. This was implemented through suitable amendment to foreign institutional investor regulations three years ago.

Growing PN investment

•The notional value of PNs outstanding, which was at Rs 31,875 crore (20 per cent of AUC) in March 2004, has grown to Rs 3,53,484 crore (51.6 per cent of AUC) by August 2007

•The value of outstanding ODIs with underlying as derivatives currently stands at Rs 1,17,071 crore, which is approximately 30 per cent of total PNs outstanding

•The notional value of outstanding PNs, excluding derivatives as underlying as a percentage of AUC is 34.5 per cent at the end of August 2007

•Currently, 34 FIIs and sub-accounts issue offshore derivative instruments (ODIs) against 14 in March 2004

... contd.