The new mechanism has come into effect from May 3.
Mutual fund managers net purchased stocks worth close to Rs 10,000 crore in April, making it the highest investment in five months, on sustained participation by retail investors.
The stock market this week will be guided by the next set of corporate earnings, macroeconomic data and French elections result, say experts.
The rupee is likely to trade in the 64-64.50 range this week on continuing foreign fund inflows, dollar sale by exporters and higher demand for the American unit from importers, say treasury heads at banks.
Foreign investors have pulled out close to Rs 1,700 crore from Indian stock markets in the last four trading sessions amid global weakness triggered by a renewed slide in crude prices.
Five of the 10 most valued Indian companies saw a cumulative erosion of Rs 32,959.50 crore in their market valuation last week, with RIL being the worst hit.
Snapping a brief recovery, the home currency ended the week with a loss of 14 paise.
About 16.6 percent of loans to corporates - or about 8.4 percent of the GDP - had been declared non-performing, according to Credit Suisse.
Benchmark indices put on a sluggish performance in this truncated week. After posting solid gains in the last week, benchmark indices ended the week in red owing to Friday's steep fall.
The foreign exchange reserves rose by USD 1.594 billion to touch a life-time high of Rs 372.73 billion in the week to April 28, supported by increase in the foreign currency assets, the Reserve Bank said.
The stock declined by 3.84 percent to close at Rs 419.75 on BSE. Intra-day, it dipped 4.22 percent to Rs 418.05.
Equities sank the most in six weeks as the Sensex crashed 267 points to close below 30,000 while the Nifty retreated from a life high amid a lower opening in Europe ahead of key US jobs data and slide in crude prices.
The domestic currency has been Asia's best performer this year and its rising clout against the US dollar has been aided by a hands-off approach by the RBI.
The BSE benchmark cracked below the 30,000-level by dropping 133 points in early trade on Friday on emergence of profit-booking after yesterday's strong rally.
Sentiment also remained upbeat following strong earnings by the country's biggest private lender ICICI Bank and the US Federal Reserve's decision to keep its policy rate unchanged.
Bank stocks were in the limelight today, surging by up to 9 percent on the government's decision to put in place a mechanism to effectively deal with the problem of mounting bad loans in the sector.
The domestic equities also got a boost after the US Federal Reserve kept its policy rate unchanged in its two-day policy review.
Registering losses for the second day, Lupin on Wednesday fell by 3 percent on US health regulator's observations for its Goa plant.
Market benchmark Sensex erased its early gains to end marginally lower at 29,894.80 Wednesday amid a sell-off in pharma and metal counters.
Stock brokers, merchant bankers and other market intermediaries can now register online, with regulator Sebi operationalising a portal for the purpose.