Theme: Alternative Investment Funds

Sub Theme: Capital Unleashed: Reshaping the securities regulation in India amidst
Hedge Fund growth

Nihit Mishra

Unitedworld School of Law

Email: niiihiiit@gmail.com

Hedge funds were recognized in 2012 by Securities and Exchange Board of India. Its
introduction was under the SEBI (Alternative Investments Funds) Regulations 2012. It falls
under Category III of AIF in India. Currently Hedge funds are at a nascent stage and lack
regulation right now. However, the concept of Hedge fund and their strategies is not new
globally. The growth of hedge funds depends on various factors like Investors right, conducive
market condition and regulatory hurdles. Unlike mutual funds, hedge funds typically do not
necessitate SEBI registration and are not obligated to regularly disclose Net Asset Value (NAV)
information which is why it is more of a unregulated financial Product which has a potential of
making a company go bankrupt by a pooled short selling mechanism although India’s authorities
have imposed a bevy of restrictions on short selling, including requiring institutional investors to
disclose planned trades to the stock exchange before they are executed, , Hedge Funds require to
carry their positions overnight which leads to heavy borrowing cost in India and India’s stock-
lending-and-borrowing segment hasn’t matured at the rate at which it was expected to and is still
very small relative to similar mechanisms in more developed markets.. A pressing need exists for
enhanced comprehension of Hedge Funds and their viability within the Indian capital market.
This requirement calls for transparent and permissive regulations that would not only facilitate
the introduction of domestically unregulated Hedge Funds but also attract well-established
international counterparts. These measures are vital to tap into the potential of the Indian market,
which is perceived as a realm brimming with opportunities.

Keywords:

1. Hedge Funds
2. SEBI Regulations
3. Alternative Investments
4. Regulatory Oversight
5. Investment Opportunities