Broad Capital Market Reforms
Sebi considers broad capital market reforms to curb speculation and simplify IPO compliance.
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Key Points
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The proposed mutual-fund-only PMS category could reduce the minimum investment requirement from ₹50 lakh to ₹25 lakh and the applicant net-worth requirement from ₹5 crore to ₹2 crore. It would invest exclusively in direct mutual-fund plans, including ETFs and specialised investment funds.
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Under the proposed PMS overhaul, managers could invest in overseas listed equities and debt, overseas mutual funds investing in listed assets and REITs, to-be-listed securities, and up to 10% of client assets in investment-grade unlisted debt, subject to FEMA, Liberalised Remittance Scheme limits and explicit client consent.
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Sebi plans to review the public-issue framework over roughly six months and may hold quarterly or half-yearly workshops with merchant bankers—particularly those handling SME issues—to clarify expectations regarding compliance and offer documents.
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The reform agenda may include a credit risk-o-meter for debt-security disclosures, while a proposal to permit mutual-fund investments through gift cards could be rejected because of concerns about misuse.
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Sebi’s proposed common advertising code is intended to replace the different promotional standards currently applied across categories of regulated intermediaries, creating more uniform requirements for market communications.
India's stock-market regulator is rolling out sweeping reforms to fix a derivatives market plagued by retail losses. SEBI Chief Sebi is cutting margin requirements for longer-dated contracts to shift traders away from speculative short-term bets on index options. The push comes after 87.7% of individual equity-derivatives traders lost money in the fiscal year ending March 2026, according to regulator data.
The reform package goes far beyond derivatives. The Hindu Business Line reports Sebi is overhauling merchant-banking rules, simplifying IPO requirements, and creating a new mutual-fund-only portfolio-management category with lower investment thresholds. The regulator also plans to tighten ethics rules for its own officials and expand foreign access to India's derivatives markets.
Margin Cuts to Curb Speculative Trading
SEBI is cutting margins on longer-dated derivative contracts to discourage risky short-term bets. Tuhin Kanta Pandey, the regulator's chairman, says the move targets index options—where most retail losses happen—and redirects money to stock futures and longer-term contracts. The goal: encourage traders to take bigger positions over months instead of days.
The derivatives market has become a retail graveyard. Nearly 88 out of 100 individual traders lost money last year, with many operating entirely in options instead of stocks. News18 reports the regulator sees margin reform as the key tool to rebalance the market toward healthier, long-term participation.
New Portfolio-Manager Rules Lower Entry Barriers
Sebi is creating a mutual-fund-only portfolio-management category with much easier access. The minimum investment would drop from ₹50 lakh to ₹25 lakh. Managers would need a net worth of ₹2 crore instead of ₹5 crore. These new managers would invest only in direct mutual-fund plans, ETFs, and specialized investment funds.
The overhaul also opens doors to overseas assets. Moneycontrol reports managers could buy overseas-listed stocks and bonds, overseas mutual funds, and even up to 10% of client money in unlisted debt (investment-grade only). All offshore moves require client consent and compliance with foreign-exchange rules.
IPO Rules Get a Simplification Overhaul
Sebi is reviewing the entire public-issue framework with one goal: cut costs and red tape. The Hindu Business Line says the regulator plans quarterly or half-yearly workshops with merchant bankers—especially those handling small-company IPOs—to clarify what regulators expect in compliance and offer documents.
The reforms may ditch price-band and print-advertising requirements that add expense without clear benefit. Sebi is also considering removing the merchant-banker requirement for small unlisted debt deals. The review should wrap up in roughly six months.
Uniform Rules and Tighter Ethics for Regulators
Sebi is replacing different advertising standards for different intermediaries with one common code. This creates uniform promotional rules across brokers, advisors, and mutual-fund sellers. NDTV Profit also reports the regulator is approving operational relief for alternative-investment funds and foreign portfolio investors, including net settlement for certain trades.
At the same time, Sebi is tightening ethics and conflict-of-interest rules for its own officials. The regulator proposed removing a ban on mutual-fund investments via gift cards over misuse concerns. Sebi also plans a credit risk meter for debt-security disclosures to help investors spot danger.
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