The Hindu Business Line : MFs to gain from higher overseas investment

Mutual funds view the increase in overseas investment to $3 billion from $2 billion as a progressive roadmap for foreign investments through MFs in the future.

The RBI had earlier liberalised norms for mutual funds to invest in a broader horizon overseas, with the proviso that they invest only in companies abroad which have 10 per cent share holding in listed Indian companies. This condition was scrapped.

"The RBI's issuance of the guideline will encourage Indian MFs to diversify risks to global and emerging markets," said Mr Prateek Agrawal, Vice-President, Head-Equities, ABN AMRO Asset Management.

"Indian markets provide better returns currently. However, increased investment overseas imply increased risks and commensurate returns," he added.

Franklin Templeton MF and Principal PNB MF are the two fund houses with a global fund. "Principal Global Opportunities Fund has invested around $60 million overseas while the limit for individual fund house hitherto was $100 million.

Now, with the rise in investment ceiling, each fund house will be able to invest approximately $125-$150 million," said Mr Shyam Bhat, AVP Investments, Principal PNB Mutual Fund.

`Proactive' step

He added that these global funds would now take off, as the guideline from RBI is a `proactive' step.

Mr Sukumar Rajah, Chief Investment Officer-Equity, Franklin Templeton, said, "We believe that this is a positive move as it helps Indian investors achieve diversification across currencies and help fund managers like us with a global presence to identify investment opportunities across the world."

Mutual fund managers do not find the higher limit as major news as it had been announced in the Union Budget this year.

"Limit for overseas investment has never been a concern in the past. We do not have many funds in this sector because the Indian economy has been very strong. But with the liberalisation of norms, investors might start looking at other stronger emerging market economies to get comparative returns," said Mr Naval Bir Kumar, Managing Director, Standard Chartered Mutual Fund.

"India has a lot of potential reserves that can be parked across in different markets. This guideline will help in the same," said Mr Agrawal.

The RBI policy has given legroom for diversification for investors to invest abroad through mutual funds in the future, said Mr Milind Barve, Managing Director, HDFC Mutual Fund.

More Stories on : Mutual Funds | Credit Policy | Overseas Investments

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