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IDBI-Principal investing in foreign securities

K.R. Srivats

NEW DELHI, July 8

IDBI-Principal Asset Management Company has joined the growing club of Indian mutual funds that are taking advantage of the recent policy decision allowing mutual funds to invest in rated foreign securities. This asset management company is the investment manager for IDBI Mutual Fund.

"We have started investing in rated foreign securities. Even though we could have done it through new schemes launched for this purpose, we have used the existing schemes to start with,'' Mr Sanjay Sachdev, Managing Director & CEO, IDBI-Principal Asset Management Company Ltd, told Business Line here.

Among Indian mutual funds, Unit Trust of India has been at the forefront having invested well over $90 million in overseas securities.

According to Mr Sachdev, IDBI-Principal can invest up to about Rs 75 crore in overseas paper. The total assets under management of IDBI-Principal stood at over Rs 1,500 crore as on August 2001.

While the Indian mutual funds were already permitted to invest in ADRs/GDRs issued by Indian companies in overseas markets, the former Finance Minister, Mr Yashwant Sinha, had in his Budget speech for 2002-03 said that the country's mutual funds would be allowed to invest in rated securities in countries with fully convertible currencies within the existing limits.

Following this announcement, the Securities and Exchange Board of India (SEBI) had said that each Indian mutual fund can invest up to four per cent of their net assets as on February 28, 2002 in rated securities in countries with fully convertible currencies and in American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) issued by Indian companies in overseas markets.

In addition to the four per cent norm, a maximum investment limit of $50 million has also been placed on each Indian mutual fund for investment in rated foreign securities and ADRs/GDRs issued by Indian companies. Currently, an upper limit of $500 million is applicable for the entire mutual fund industry for making investments in ADRs/GDRs issued by Indian companies and in rated foreign securities.

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