Thursday September 27, 02:13 AM
Funds' foreign cap now $300m
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By Economy Bureau
The Securities & Exchange Board of India on Wednesday raised mutual funds' overseas investment cap to $300 million from $200 million and stretched the list of instruments they can put money in. Sebi has allowed MFs to invest abroad in ADRs and GDRs issued by foreign companies. The MFs can also subscribe to overseas initial and follow-on public offers, money market instruments, government securities, repos and short-term deposits. A government committee is also expected to soon decide if unlisted companies can access ADRs and GDRs abroad. The move, which comes a day after the Reserve Bank of India increased the limit for the fund industry's overseas exposure by a billion dollar to $5 billion, is expected to encourage capital outflows and, in the process, arrest the rising rupee. The rupee has gained 11% this fiscal year. HDFC Bank's chief economist Abheek Barua said the measures would have only a "minor impact" on the rupee since inflows would continue to beat outflows, driven by an economy growing at over 9% and a stock market rising at 22% this fiscal. According to Sebi data, foreign funds have invested about $1.5 billion since last Thursday, bringing the total foreign investment in Indian stocks to a record $11 billion so far this year. Sebi further dispensed with the norm that barred funds from investing more than 10% of their net assets abroad Sanjay Sinha, chief investment officer, SBI Funds Management Private Ltd, said "The new norms would encourage investors to diversify funds in overseas markets, like China and South Korea, which have given much better returns than India in the last calendar year." He said, in the last one month alone, eight funds had launched hybrid schemes to invest overseas. Dhirendra Kumar, CEO of Value Research, a mutual funds-tracking company, explained that raising the limit for a single fund house would not make much of a difference since funds were nowhere close to breaching the existing caps. He estimated that MFs to date had invested not more than a total of $300 million overseas.
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