Indian funds which have been buying shares in Google owner Alphabet, Starbucks, Amazon and Apple, and investing in other large global funds, are betting that Indian investors’ appetite for global investments would grow stronger.
The Association of Mutual Funds in India (AMFI) has written to the RBI to raise the limit. The association is said to have already held meetings with capital markets regulator Sebi, which is now discussing the matter with the banking regulator.
“The RBI now has to take the final call in permitting additional limits, which it may do once market volatility recedes globally,” said one of the people.
In any matter related to foreign exchange, the RBI will have to issue a circular, and Sebi will enable it only after that.
The RBI, Sebi and the AMFI did not reply to ET’s emails seeking comment.
Aditya Birla, Axis, DSP, Edelweiss, Templeton, ICICI Prudential, Motilal Oswal, Nippon and SBI are among local fund houses that run mutual fund plans that invest in offshore securities, show data from industry tracker Value Research.
Collectively, the outstanding foreign assets under management is Rs 46,930 crore, or about $6.23 billion, going by Tuesday’s exchange rate. It is not valued on any uniform exchange rate.
The outstanding limit of $7 billion does not include investments by exchange-traded funds, which have an upper limit of $1 billion where there is still good space for investments.
“The overseas investment limit for mutual funds warrants a significant increase since this would enable portfolio diversification for Indian investors beyond domestic securities, while such money is professionally managed by Sebi-regulated fund managers,” said Tejesh Chitlangi, partner, IC Universal Legal.
The $7 billion cap was introduced nearly a decade and half ago, when India’s foreign exchange reserves were around $254 billion. The forex reserves have now swelled to $632 billion, providing comfort to the authorities who always stay prepared to cut wild swings in the financial markets.
“When we have a larger cushion of forex reserves, it acts as a shield against any exchange rate volatility,” said an industry official.
In May last year, Sebi doubled the overseas investment limit of alternative investment funds (AIFs) to $1.5 billion. The decision was made after consultations with the RBI.
“The overseas investment limits were doubled up for AIFs in the past and taking cues from the same, a substantial increase should be on cards since there are ample investment opportunities available globally,” said Chitlangi.
One of the large-ticket investments under this category has been by JPMorgan Funds – Greater China Fund by Edelweiss Greater China Equity Off-shore Fund, at Rs 1,877.17 crore, show Value Research data.
Fund houses including Aditya Birla, Axis, Motial Oswal and Nippon have taken bets on new-age global stocks like Amazon, Apple and Alphabet, show Value Research data.
Assets managed by the home-grown mutual fund industry expanded to about Rs 38.94 lakh crore in January from Rs 5.5 lakh crore at the beginning of 2008, the year the cap was set, according to Value Research data.
