The Securities and Exchange Board of India (SEBI) has granted approval for a new regulatory framework governing Portfolio Management Services (PMS). This decision, made on September 24, 2026, aims to provide portfolio managers with a broader range of investment options. Key among these are investments in Initial Public Offerings (IPOs), primary debt issuances, and select foreign securities.
The SEBI board has endorsed the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, which will replace the existing regulations from 2020. These new rules are designed to stimulate growth within the PMS industry, simplify compliance processes, integrate various provisions, and eliminate redundant regulations.
Under the revised framework, portfolio managers can now invest their clients’ funds in IPOs and primary market issuances in the debt segment. This change is expected to offer PMS providers more flexible access to the primary market, thereby expanding opportunities for investors.
Additionally, SEBI has permitted Discretionary Portfolio Management Services (DPMS) to invest up to 10% of the total managed assets (AUM) in non-convertible, unlisted debt securities, contingent upon client consent.
The new regulations also grant portfolio managers greater flexibility in utilizing exchange-traded derivatives. They may now hold exposure through derivatives up to 1.25 times the client’s total AUM.
In a significant move, SEBI has approved increased participation for Foreign Portfolio Investors (FPIs) in exchange-traded commodity derivatives. This initiative aims to enhance liquidity in the commodity derivatives market and deepen market engagement.
Under the new provisions, FPIs will be allowed to engage in non-agricultural index-based derivatives, regardless of whether the underlying contracts settle in cash. They will also have the opportunity to participate in non-cash-settled non-agricultural commodity derivatives.
However, SEBI has introduced safety measures. FPIs participating in non-cash-settled commodity derivatives must exit their positions before any delivery obligations arise. They are required to close their positions before the tender period begins, which starts three days prior to contract expiration.
Moreover, FPIs will be restricted from increasing their positions after the T+3 day mark. This regulation aims to prevent excessive speculation or additional position-building close to the delivery period.