Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has expressed strong confidence that the recently announced India-US trade deal will significantly boost investments and accelerate capital formation within the country. Speaking to reporters on Wednesday, Pandey highlighted how the agreement removes key uncertainties that have been affecting foreign investor sentiment.
Removing Uncertainties to Spur Investment Decisions
Pandey emphasized that capital formation typically accelerates when uncertainties are eliminated from the market environment. "With the deals that have been done on the trade side, a lot of uncertainties have been removed," he stated. "Capital formation is always accelerated with the removal of uncertainties... the investment decisions will be spurred, and there will be a greater predictability on the capital to go for that."
The SEBI chief was specifically addressing whether the finalization of the India-US trade deal could lead to a reversal in outflows from foreign portfolio investors (FPIs). He noted that the trade agreement would also have a positive impact on the exchange, bringing in much-needed stability and predictability for market participants.
Context of FPI Outflows and Recent Developments
FPIs have been offloading domestic equities for several months amid concerns over various geopolitical tensions, including the imposition of higher reciprocal tariffs by the United States on India and other major economies. The data reveals a concerning trend:
- In 2025, foreign investors sold approximately Rs 1.66 lakh crore of domestic shares on a net basis
- Since January 2026, they have sold equities worth Rs 27,612 crore
- These higher outflows from FPIs contributed to pressure on the Indian rupee, which depreciated by 5 percent against the US dollar in 2025
The announcement of the India-US trade deal has already shown positive effects on market sentiment. On Tuesday following the announcement, domestic stock market indices Sensex and Nifty both surged by 2.5 percent each. Foreign investors turned net buyers of local equities, purchasing Rs 5,236 crore worth of shares, while the Indian rupee strengthened by over 1 percent against the US dollar.
Details of the Trade Agreement
On Monday, US President Donald Trump announced that India and the United States had reached an agreement on a trade deal. Under this agreement, Washington will reduce reciprocal tariffs on Indian goods to 18 percent from the current 50 percent. This development follows last week's conclusion of a landmark Free Trade Agreement between India and the European Union, marking a significant period for India's international trade relations.
SEBI's Regulatory Streamlining Efforts
Pandey also highlighted SEBI's ongoing efforts to streamline regulations and ensure ease of doing business for foreign investors. "As a regulator, our duty is to provide a consistent, predictable, easy and frictionless framework to ensure the easy flow of capital," he explained. "As part of this, we are constantly improving the regulatory framework."
The SEBI chairman outlined several recent measures implemented by the regulatory body to facilitate foreign investment:
- Reduction in registration timelines for market participants
- Facilitation of digital signatures to enable submission of documents electronically
- Simplification of the block deal framework to enhance market efficiency
"All of these issues are very important for FPIs in terms of market regulation," Pandey noted. "Rest is their own assessment of their post-tax returns, which are available in different markets. They keep assessing and deciding about that."
Pandey made these remarks while speaking on the sidelines of the pan-India outreach programme for corporate bonds, underscoring SEBI's commitment to developing robust capital markets in India. The regulatory improvements combined with favorable trade agreements are expected to create a more attractive environment for foreign capital inflows, potentially reversing the recent trend of FPI outflows and supporting India's economic growth objectives.
