SEBI proposes hike in cap for select investors in bourses

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Mumbai, Sep 5 (UNI) In order to encourage long-term investors to pick up equity in two bourses Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), equity market regulator Securities and Exchange Board of India (SEBI) today proposed to hike individual cap on holdings in a stock exchange to 15 per cent from the existing five per cent 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 five per cent of the equity in a stock exchange, SEBI proposed in its discussion paper, while inviting comments on the same by September 19.

The proposal came as some investors in NSE and Over-the-Counter (OCT) Exchange of India hold more than five per cent. They have been asked to dilute their holding to five per cent, 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 five per cent.

SEBI has received communication from certain quarters that the present limit of five per cent 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,'' a leading stock broker said.

The cap on individual entity was capped at five per cent 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 per cent in stock exchanges in India. Also, foreign investment is allowed up to 49 per cent with Foreign Direct Investments capped at 26 per cent and Foreign Institutional Investments limited to 23 per cent.

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