Mutual funds allowed to resume investing in international stocks

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Capital markets regulator Securities and Exchange Board of India (Sebi) has allowed mutual funds (MFs) to resume investing in international stocks within the aggregate mandated limit of $7 billion for the industry.

In January, the regulatory body 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. Following the Sebi directive, the Association of Mutual Funds in India had asked fund houses to stop accepting flows in schemes investing overseas from February.

The recent meltdown in global stock markets has reduced the cumulative value of investments made by all the mutual fund houses together and the approval comes after AMFI made a request to SEBI for reviewing investment in overseas securities by the MFs.

“Mutual fund schemes may resume subscriptions and make investments in overseas funds/securities up to the headroom available without breaching the overseas investment limits as of end-of-day of February 1, 2022, at the mutual fund level,” SEBI said in a communication to AMFI last week, asking to ensure that the total utilisation of the overseas limit by each AMC remains capped at the February level.

A mutual fund launching a new scheme and intending to invest overseas is required to specify the amount it will invest outside India. Following the Sebi’s direction, several fund houses like PPFAS Mutual Fund, DSP Mutual Fund and  Edelweiss Mutual Fund, had stopped accepting inflows into their certain schemes with international mandates.

As per the rules, domestic mutual funds can invest up to $7 billion in overseas stocks and an additional $1 billion in exchange-traded funds (ETF).

Meanwhile, Edelweiss Mutual Fund announced that it will be accepting inflows in its international schemes from Tuesday.  The schemes are include ASEAN Equity Off-shore Fund, Greater China Equity Off-shore Fund, US Technology Equity Fund of Fund, Emerging Markets Opportunities Equity Offshore Fund, Europe Dynamic Equity Offshore Fund, US Value Equity Off-shore Fund and MSCI India Domestic & World Healthcare 45 Index Fund.

(With inputs from PTI)

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