'Happy to engage': What SEBI chief said on FPI outflows, market resilience, and conflict of interest

India's strong economic fundamentals, deepening capital markets, and rising domestic investor participation will drive sustained growth, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said on Friday.

Speaking at the Moneycontrol Global Wealth Summit, Pandey said, “India has exhibited resilience as well as strong growth momentum over the years as we face global headwinds in terms of geoeconomic fragmentation, tariff issues and elevated uncertainties.”

“A high level of sustained growth, low current account deficit, low external public debt, healthy bank balance sheets, fiscal consolidation roadmap, continued government push on government capex and infrastructure. and forex reserve buffer are some key pillars of support for India's resilience against exogenous shocks,” he added.

The SEBI chief cited also International Monetary Fund (IMF) estimates, which project India's economic growth at 6.5% for FY 2024-25, much higher than the 4.2% expected for emerging markets and developing economies.

FPIs and domestic capital strength

Pandey highlighted the role of domestic institutional investors in stabilising Indian markets amid fluctuating foreign portfolio investments (FPIs). While FPIs remain crucial, he noted that increasing domestic ownership through mutual and pension funds has enhanced market resilience.

"You may have noticed, there has been FPIs out there because FPIs might may react to global events and come in and out. Nevertheless, I think domestic institutional investors have stably filled up the gap in many ways," he said, adding that the regulator was conscious of the need to create a conducive environment to attract foreign capital.

Foreign investors have pulled out ₹34,574 crore from the Indian equity markets in February pushing total outflows to ₹1.12 lakh crore in the first two months of 2025. The massive selling by FPIs has resulted in Sensex falling over 5% year-to-date.

“We will be happy to engage with FPI and AIF industry participants to address their difficulties and further rationalize regulations to promote ease of operation,” the SEBI chairman said.

He also pointed to the growth of retail investors, with the number of unique investors in SEBI’s ecosystem rising from 49 million in 2020 to 136 million currently. Mutual fund participation has also surged, with investors increasing to 53 million from 22 million in five years.

Regulatory focus and market reforms

Pandey reiterated SEBI's commitment to ensuring trust and transparency in capital markets, emphasizing that governance, disclosures, and ethical standards must be upheld by all stakeholders.

"A well-regulated market instils confidence among investors, ensuring fair and efficient capital allocation. And I think the trust and transparency extends to SEBI itself," he said.

Pandey also touched upon the issue of conflict of interest at SEBI Board, a charge his predecessor Madhabi Puri Buch faced in a report by now-defunct US-based short-seller Hindenburg Research.

“We need to not only create trust of all stakeholders in us, but we also need to maintain that trust. And to that extent, I think we need to be more transparent, including on various other measures, including, for example, on the conflict of interest of the board, and so on, and we will be coming forward with our own plan to further transparently reveal this conflict of interest etc to the public,” the newly appointed SEBI chairperson said.