MFs: MFs unlikely to increase foreign investment cap

Indian regulators unlikely to allow any hike in mutual fund limits Investment abroad Propertyin part because it can put further pressure Rupee Which is already at a historic low, said two people familiar with the matter.

There is a limit of $7 billion on the total investment abroad by Indian mutual fund schemes. Fund who actually own the property. There is a separate limit of $1 billion for local funds that invest In Foreign Exchange Traded Funds (ETFs). The decline in value of some of those schemes has led to investors seeking higher limits to help reduce their average investment cost.

“While SEBI (Securities and Exchange Board of India) has been in favor of increasing the limit to help mutual funds

In order to raise more funds, the central bank is reluctant to raise the limit,” said one of the people.



The person said there may be no need for regulators to raise the limit as Indians can use other avenues, such as the Liberalized Remittance Scheme (LRS) that allows resident Indians to invest abroad, up to $250,000 in a financial year. Allows for free shipping, the person said.

The rupee hit a new low of $78.28 on June 13, hurt by large capital outflows from foreign portfolio investors amid a sudden turn in global financial market conditions due to the rollback of extraordinarily easing monetary policies to fight inflation. Foreign investors have already sold Indian securities worth a record $27.3 billion this year. If domestic investors still start allocating higher resources to foreign stocks, it could put more weight on the local currency and the RBI in particular is unlikely to be in favor.

RBI and SEBI did not respond to ET’s queries.

At the end of last financial year, mutual fund overseas schemes hit the set limit of $7 billion, as investors benefited from the bullish market in the US. Mutual funds have since stopped accepting fresh money in those schemes as the RBI has not removed the limit. The industry is lobbying for a higher limit.

Indian mutual funds offer at least 65 global funds to domestic investors. He has assets under management of Rs 34,278 crore ($4.39 billion) as of last week based on his net worth. While they can sustain any increase in asset value in excess of $7 billion, the decline in the value of their holdings does not allow them to invest more.

Investors who want to further increase foreign investment have been put off because of the nominal cap.

“It is natural for them to diversify investments abroad where they want higher returns.

stocks,” said a fund manager, who is associated with such offshore funds.

About four months ago, the Association of Mutual Funds in India had written to the RBI requesting an increase in the limit. It also discussed with SEBI.

There are two types of these types of funds: active and passive. While Fund of Funds is of passive nature, investment through ETFs is active. Each fund house can use up to $1 billion of the outstanding limit each year and up to $300 million for ETFs. It is not valued at the same exchange rate.

Aditya Birla, Axis, DSP,

Franklin Templeton, Kotak, Nippon and are among local fund houses that run mutual fund schemes that invest in offshore securities, data from industry tracker Value Research shows.

In the three years till June 16, 2022, some funds like DSP World Mining Fund have given returns of up to 21.9%.

Launched in January this year, ICICI Prudential Metals and Energy Equity Plan delivered 39% returns till the second week of June, but a fall in global indices after 40 years of high inflation in the US pulled it down to 22.5% on Friday.