Financial Daily from THE HINDU group of publications
Wednesday, Feb 22, 2006
Financial Daily from THE HINDU group of publications Wednesday, Feb 22, 2006 |
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Financial Policy Markets - Mutual Funds MFs may get more leeway for overseas investments Restrictions likely on exposure to shares of individual companies Sarbajeet K. Sen
New Delhi , Feb. 21 THE Government could soon announce a more liberalised overseas investment regime for the mutual fund industry with the rider that fund houses would have to comply with stringent regulatory restrictions on exposure to shares of individual companies. The mutual fund industry is hoping that the Finance Minister, Mr P. Chidambaram, in his forthcoming Budget would announce the lifting of the present stipulation that severely curtails their freedom in investing abroad. The present regulations stipulate that a fund can invest only in listed overseas companies that have a listed Indian subsidiary in which the parent company has a minimum 10 per cent stake. The overall cap for industry for investments overseas has been set at $1 billion. However, there have been severe pressures on the Government to liberalise the regime by allowing mutual funds to invest in any actively traded listed company on a recognised overseas stock exchange. The industry feels that the restrictions are not in keeping with the present spirit of globalisation. Stipulating safeguards: Among the suggestions that the Government is considering is liftingthe present restrictive regime while at the same time stipulating safeguards by specifying that the fund houses cannot invest more than 5-10 per cent of the corpus in schemes in a single company. "We are hoping that the Budget would liberalise the present regime for investment abroad. "There is no harm in stipulating a percentage of the total corpus of a scheme that could be invested in a single company," the Chairman of Association of Mutual Funds of India, Mr A.P. Kurien, told Business Line. The present stipulations on overseas investment have been so restrictive that hardly any investments have been made abroad by the industry. "The $1-billion cap can remain since investment in overseas markets is nowhere near the limit," Mr Kurien said. The industry is well equipped to soak in the larger dose of freedom if the Government permits. "Many of the fund houses are run by global giants such as Franklin Templeton, Principal Financial, Prudential etc. "They have adequate research on every market to invest wisely in stocks of sound companies," Mr Kurien said. He said the present restrictions are keeping the Indian mutual fund industry from investing in markets such as Brazil and South Korea. Industry players also feel that it was time to lift the present restrictions. "If the Government lifts the present cap, investment by Indian mutual funds could be easily ramped up to $1 billion," the Managing Director and Chief Executive Officer, UTI Mutual Fund, Mr U.K. Sinha said.
Related Stories: More Stories on : Financial Policy | Mutual Funds
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