“Between October and now, more than 400 FIIs have been registered in the country. Their number stands at over 1,400 today. It was about 1,000 at the time when we brought in some restrictions on P-notes,” said Sebi whole-time member T C Nair.

Another 20-30 FIIs will be registered by Sebi in next three months whose applications are pending. “We hope to clear them by December-January 2008-09,” he said while launching an Assocham study on hedge funds here on Tuesday.

P-notes are investment instruments used by FIIs or their sub-accounts to facilitate investment by overseas investors in stock markets who do not wish to invest directly. Last year in October, Sebi had proposed that FIIs and their sub-accounts could not issue or renew P-notes with underlying as derivatives with immediate effect. They had to unwind their current position within 18 months.

The capital market regulator had also said FIIs cannot hold over 40 per cent of assets in P-notes. Till September 1, FIIs invested Rs 547,926 crore but also sold equities worth Rs 576,868 crore.

Full rupee float

Mr Nair said Sebi had made it flexible for FIIs to come and register in India since October 2007 and the move was successful.

“The number of sub-accounts has also gone up to 4,000, which indicates that the country has been very flexible so far as foreign investors are concerned.” He admitted that there are still certain restrictions as far as limits on investment or products are concerned.

“Once we have total capital-account convertibility, there will be free flow of funds across the border but that decision will have to be taken by the RBI and the government,” Mr Nair observed.