On Wednesday, SEBI eased the regulatory and compliance framework for foreign portfolio investors (FPI) by broad-basing their classification, simplifying their registration requirements and permitting them to carry out off-market transfer of securities.

Further, FPIs would now be classified into two categories instead of three.

The market regulator also relaxed rules on share buybacks for listed firms that own non-banking financial companies and housing finance company subsidiaries. The move will remove the restriction of debt-to-equity ratio norms for conglomerates as these were calculated on a consolidated basis for guiding buybacks.

The new framework for FPIs is expected to benefit the stock markets that have been dull after the introduction of higher tax surcharge in the 2019 Budget presented by FM Nirmala Sitharaman on 5 July.

Foreign investors started withdrawing funds from the Indian equity markets after the introduction of higher tax surcharge on the super-rich. In the last two months, FPIs have sold shares in Indian companies worth $3.07 billion.

FPI regulations have been redrafted based on the recommendation of a committee headed by former RBI deputy governor H.R. Khan.

The requirements for issuance and subscription of offshore derivative instruments (ODIs) have also been rationalised.

Offshore funds floated by mutual funds would be allowed to invest in the country after registration as FPIs.