Overall feedback on new FPI regulations positive: Nishith Desai Associates

"However, we will have to wait until Sebi comes out with operating guidelines. If they are going to look at the new category 2 investors like institutional investors or are they going to relegated them to the non-institutional class," he said.

Talking on investors from Mauritius or Cayman, Sancheti said, "Here we have to look at the operating guidelines, which Sebi would be publishing today. However, one thing that is clear from regulation is that category 2 FPIs would not be allowed to either issue or subscribe to Outward Direct Investment (ODIs) or P-Notes and this is something where a lot of Cayman-based funds were subscribing to ODIs."

"Now the universe of eligible subscribers would shrink drastically especially when Cayman and Mauritius are completely ruled out of category 1 eligibility norms,” he said, adding that the only saving grace is if some of these funds are managed by the US or any other FATF member country, wherein they could qualify as category 1 FPI.