India’s markets regulator has given high risk offshore funds seven months to liquidate holdings if they fail to disclose data about their investors by January 29, two sources said on Wednesday, allaying fears of an impending sell-off in the market.

“There is no immediate deadline or cliff for offshore funds to liquidate any holdings,” said the first of the two sources.

On January 23, a local media report said the Securities and Exchange Board of India (SEBI) will not extend the deadline for disclosures. Indian shares slumped 1.5 per cent on Tuesday on fears that this will lead to some foreign investors immediately selling their holdings in India.

The sources declined to be named as they are not authorised to speak to media. The SEBI spokesperson did not immediately respond to a request for comment on Wednesday.

About 500 billion Indian rupees ($6.02 billion), or 0.3 per cent of assets under management of all offshore funds invested in India, may have to be liquidated by August 25 unless necessary disclosures are made, according to sources at custodian bankers, who manage foreign investor flows into India.

SEBI, had in 2023 asked offshore funds that have invested more than 50 per cent of their assets under management (AUM) in a single group of companies and have more than 250 billion rupees ($3 billion) in Indian equity markets to disclose identities of their investors.

The tighter rules followed allegations by US shortseller Hindenburg Research a year ago that the Adani group of companies had used offshore funds to circumvent market regulations, which the group denied. The regulator’s probe into Adani group dealings has found technical violations of its disclosure rules but a full report is likely within three months.

Elara Capital, whose funds have 94 per cent of assets under management in Adani group stocks as of June 2023, according to information provider Primeinfobase, is evaluating whether to disclose or trim its holdings, said Raj Bhatt, chairman and chief executive, Elara Capital.

“Suitable disclosures are being made, this exercise is being done by all funds and not just us,” Bhatt said. “In case investors do not want to disclose and we need to sell our holdings; this is being reviewed right now.”

Funds that have not complied with the new disclosure requirements by end-January have an additional grace period of one month to either make the necessary disclosures or rebalance their portfolios, according to a document shared with custodian banks in December, reviewed by Reuters.

During this time, the funds will not be able to buy additional stocks in the Indian market.