Securities and Exchange Board of India (SEBI) has introduced a new rule that could make life easier for Foreign Portfolio Investors (FPIs).
The regulator has now allowed FPIs to net funds for same-day trades in the cash market.
In simple terms, investors can now adjust their buy and sell transactions on the same day instead of settling each trade separately.
What Changes for Investors?
Earlier, FPIs had to settle trades on a gross basis.
That meant:
Paying for all purchases fully
Receiving money separately for all sales
This system required more cash and increased costs.
Now, with netting allowed:
Sale proceeds can be used to fund purchases on the same day
Only the final (net) amount needs to be settled
This reduces the need for extra funds and improves efficiency.
Why This Move Matters
This change is especially helpful during index rebalancing days, when trading volumes are high.
In the old system, investors often faced:
Higher liquidity requirements
Increased funding costs
Losses due to currency fluctuations
The new framework is expected to reduce these problems and make trading smoother.
Important Conditions You Should Know
The netting benefit comes with some rules.
It applies only to “outright transactions”—that is, either a buy or a sell in a security within a settlement cycle, but not both.
If an investor both buys and sells the same stock on the same day, those trades will still be settled separately (on a gross basis).
How the Calculation Works
Here’s how it plays out:
If purchases are higher than sales → the investor must pay the difference
If sales are higher than purchases → the extra amount cannot be used for other obligations
Also, even though funds can be netted, securities will still be settled on a gross basis between the investor and custodian.
When Will This Start?
SEBI has said the new system will be implemented on or before December 31, 2026.
Other charges like Securities Transaction Tax (STT) and stamp duty will continue as usual.
The Bottom Line
This move is a step towards making India’s markets more efficient and investor-friendly.
By reducing costs and simplifying fund management, SEBI is making it easier for foreign investors to operate—especially during high-volume trading periods.
