Subject: Urgent Need for Stricter Regulations on FII Investments to Prevent Market Manipulation
Dear Sir/Madam,
I am writing to bring to SEBI’s attention the growing concerns regarding the impact of Foreign Institutional Investors (FIIs) on the Indian stock market. While FIIs play a crucial role in providing liquidity and boosting investor confidence, their unrestricted capital flows have also led to increased market volatility, artificial bubbles, and sudden crashes—severely affecting retail and domestic investors.
The recurring pattern of FIIs engaging in large-scale investments during bull runs, only to exit swiftly during corrections, often results in manipulated market movements. This volatility can wipe out significant wealth from small investors without control over these fluctuations. In light of this, I strongly urge SEBI to consider the following regulatory measures:
- Minimum Lock-in Period for FII Investments
- Introducing a mandatory lock-in period (e.g., 6–12 months) to prevent speculative short-term trading that destabilizes the market.
- This will ensure that FIIs invest in India with a long-term perspective rather than using the market as a short-term profit-making vehicle.
- Higher Exit Taxes and Gradual Exit Strategy for FIIs
- Implementing a higher tax rate on short-term capital gains (STCG) for FIIs if they exit within a short period.
- Mandating a phased exit strategy, where large FII sell-offs must be conducted in a structured manner over a defined period, rather than sudden offloading that triggers panic selling.
- Enhanced SEBI Surveillance & Transparency on FII Transactions
- Stricter scrutiny of high-frequency and algorithmic trading by FIIs, which can manipulate stock prices.
- Requiring FIIs to disclose detailed exit strategies and sectoral investment patterns, ensuring that they do not create artificial price inflations in specific industries.
- Sectoral Caps to Prevent Overconcentration
- Limiting excessive FII exposure in specific sectors to prevent bubble formation in industries that are not backed by fundamental growth.
I firmly believe that these measures will promote a more stable and fair market, protecting long-term investors from sudden shocks while still encouraging sustainable foreign investments. SEBI’s proactive regulatory oversight has always been instrumental in safeguarding market integrity, and I hope these concerns will be addressed with due seriousness.
I would appreciate SEBI’s views on this matter and any possible regulatory steps being considered to address this issue.
Thank you for your time and consideration.
Best regards,
