You won't be permitted to invest in mutual fund schemes that place money in international exchange-traded funds (ETFs) as of next month, April 1. The Securities and Exchange Board of India (SEBI), the stock market regulator, has prohibited mutual funds from accepting new investments as of this date.
The reason behind SEBI's ruling is that there is a set maximum investment limit of $1 billion (about ₹ 8,332 crore) in overseas exchange-traded funds. This investment has now nearly reached its limit. In relation to this, the Association of Mutual Funds in India (AMFI), which oversees mutual fund institutions in the nation, has also received a letter from SEBI.
Two mutual fund plans that make foreign investments
1. Direct foreign share investment: Mutual fund companies make direct foreign share investments in this scenario. A maximum ceiling of seven billion dollars, or around ₹ 58,347 crore, has been set for this. Investment in it is prohibited by SEBI after this threshold is exceeded.
The investment cap had been surpassed earlier in January 2022, at $7 billion. SEBI then requested that the investment be stopped. Once more in 2023, SEBI withdrew its directive and permitted mutual funds to make international stock investments provided their assets under management (AUM) had decreased as a result of a decline in the price of foreign equities.
2. Investing in Fund of Funds: In this strategy, overseas ETF units are purchased by mutual funds. A predetermined ceiling of $1 billion is set aside for this. Just now, SEBI issued an order prohibiting investment in this.
AMFI itself is also mindful of the upper bound.
Mutual fund plans that invest overseas always consider the maximum amount that can be invested. Because of this, even after the limit is raised, they frequently do not accept investments. They resume investing at the same time that their AUM drops.
The 26th of February marked the termination of investing opportunities for four mutual fund schemes: Nippon India US Equity Opportunities, Nippon India Japan Equity, Nippon India Taiwan Equity, and Nippon India ETF Hong-Seng BeES.
