Economic Times- When the dust raised by the subprime fiasco settles, hedge funds will have the option to trade directly in India. Capital market regulator Sebi has decided to allow hedge fundsto register directly as foreign institutional investors (FIIs).

“We are not creating a separate category of registration for such funds,” Sebi chairman M Damodaran said here on Thursday. Hedge funds are pooled funds of wealthy individuals and institutionsthat invest in several instruments across markets.

Sebi’s move will discourage the practice of hedge funds investing in Indian equities indirectly through participatory notes (PNs) and reduce transaction costs. “We have registrationrequirements for FIIs. Some hedge funds had applied to us in the past for registration. We have told these funds is to see if they can comply with the FII regulations of 2004 and register with us,”Mr Damodaran said.

He was speaking to reporters on the sidelines of a convocation function of the Institute of Insurance and Risk Management, chaired by Insurance Regulatory and Development Authority chairman CSRao. Mr Damodaran also said the subprime crisis could lead to some market correction, but it will be manageable. “The Indian equities market continues to be safe for investors. We do not have tounduly worry as there will be no destabilising influence on the markets. Moreover, there are no systemic issues,” he said.

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