SEBI May Permit Mutual Funds to Invest in Overseas
Mutual funds in India are currently not explicitly allowed to invest in overseas mutual fund units that have exposure to Indian securities, leading many funds to avoid such investments. However, capital markets regulator SEBI has observed that given India’s strong economic growth prospects, Indian securities present an attractive investment opportunity for foreign funds. Consequently, international indices, ETFs, and mutual funds allocate a portion of their assets to Indian securities.
For example, as of April 30, 2024, the MSCI Emerging Markets Index has an 18.08 percent weightage in Indian securities, and as of March 31, 2024, JP Morgan’s ‘Emerging Markets Opportunities Fund’ holds approximately 15 percent in Indian investments. Therefore, SEBI is considering allowing Indian mutual funds to invest in overseas funds with limited exposure to Indian stocks.
SEBI has consulted with industry representatives from the Association of Mutual Funds in India (AMFI) and various asset management companies (AMCs). It has proposed that mutual fund schemes may invest in overseas mutual funds, provided these funds have no more than 20 percent of their net assets invested in Indian securities.
