Pandey outlined a market-making framework for corporate bonds to boost liquidity and price discovery, proposing two-way quotes, narrower bid-ask spreads, and the use of derivatives on corporate bond indices and total return swaps to aid risk management.

He called for an approach of ‘optimum regulation’ for bond markets and urged collaboration among stakeholders to reach deeper, more liquid corporate bond markets.

Foreign portfolio investors were net buyers of Indian equities on the day after the trade deal announcement, despite ongoing outflows earlier in the period.

Domestic indices rose about 2.5% following the trade deal, with FPIs posting inflows and the rupee strengthening as sentiment improved.

Pandey said the deal could boost the exchange and market stability by reducing volatility driven by FPIs’ concerns.

At a Sebi event, he declined to comment on possible changes to securities transaction tax on derivatives and affirmed that the current framework remains in place.

SEBI has been streamlining regulations to facilitate foreign investment, including faster registration, digital signatures, and simplification of the block deal framework to create a more predictable framework for capital flows.

Sebi said it is not considering additional regulatory measures on derivatives at present and will continue with the existing framework while closely studying market data.

Efforts to make the market more investor-friendly include a common contract note, streamlined registration, digital signatures, and proposed netting of margins for FPIs, all aimed at ease of doing business.

Corporate bonds represent roughly 16% of India’s GDP, well below peers, signaling significant growth potential for the sector.

Structural challenges in the corporate bond market include a skew toward highly rated issuers, domination by financial institutions, private placements reducing transparency, and a shallow secondary market.

Retail participation efforts include online bond platforms and a lower minimum investment threshold, with awareness of corporate bonds still around 10% of the population.