SEBI Eases Arbitrage Fund Rules to Boost Stock Liquidity

The Securities and Exchange Board of India has eased regulatory requirements for arbitrage mutual funds to address liquidity shortages in stock closing auctions. Under the new rules, these funds are permitted to temporarily carry unhedged positions of up to 1% of their plans.

This regulatory shift targets a substantial pool of market capital to stabilize struggling auctions. As of the end of August, arbitrage funds held combined assets totaling 3 trillion rupees, or approximately $31 billion. By granting this flexibility, the regulator aims to increase the availability of liquidity within the Indian equity market.