The Securities and Exchange Board of India (Sebi) has permitted mutual funds to invest in foreign stocks within the aggregate mandated limit of $7 billion for the industry.
The investment approval has come in the wake of a major correction in global markets that brought down the valuation of international stocks and redemption from the schemes.
In January, Sebi had asked mutual fund houses to stop taking fresh subscriptions in schemes investing in overseas stocks. The directive to stop subscription was mainly on account of the mutual fund industry crossing the mandated limit of $7 billion for overseas investments.
The Association of Mutual Funds in India (AMFI) has clarified that mutual fund schemes may resume subscriptions and make investments in overseas funds and securities up to the headroom available without breaching the overseas investment limits utilised by MFs and AMCs as of February 1, 2022 at the mutual fund level.
“Further, total utilization of the overseas investment limit by each AMC or mutual fund should remain capped at the amount as on February 01, 2022 to ensure compliance with the SEBI directive,” AMFI said on Tuesday.
Thus, the AMCs may utilize the headroom available in the overseas investment limit created due to redemptions and consequent sale of overseas securities post February 01, 2022. As many as 65 funds of Indian funds have invested over Rs 34,000 crore in equities abroad, mostly in the US market.
Following the Sebi’s direction in February, several fund houses had stopped accepting inflows into their schemes with international mandates.