The Securities and Exchange Board of India has raised the limits for overseas investments by mutual funds. The limit has been increased from current US $200 million to US $ 300 million. The move will help mutual funds to invest more in many overseas markets offering better return compared to India. For the second time this year, the overseas investment rules have been liberalized by SEBI.

SEBI has liberalized the norms further by removing the condition of 10 years experience in overseas investing before making investment in Overseas Exchange Traded Funds. Mutual funds have welcomed the move of SEBI and have said that this offers them a level playing field with existing mutual funds.

Mutual Funds have also been allowed to invest in American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) issued by foreign companies. Mutual funds will also be eligible for investment in Initial and Follow-on public offerings of overseas companies for listing at recognised stock exchanges in the overseas markets.

Indian mutual fund market has seen a tremendous growth in recent years. With stock markets offering decent returns, most of mutual funds are offering good Net Asset Values to unit holders. With the current move, Mutual funds will start offering many new products. Recently, many mutual funds have launched overseas market funds and investors may see more investment options in days to come. Investors may also be allowed to invest in Real Estate Investment Trusts (REITs) in near future.

In an official statement, SEBI officials said, “The sub-ceiling linked to the net assets of an asset management company (AMC) as on March 31 of each year has also been dispensed with.”

Reactions from Mutual Fund managers

“These are all steps towards big bang reforms for our country. With the cap on overseas investments increased, investors will now be able to place their eggs in different baskets, thus being able to diversify their portfolio. This will also lead towards fuller capital account convertibility,” said Mr. Ajay Bagga, CEO Lotus India Mutual Fund.

Mukul Gupta, CEO of Birla Sun Life AMC said, “Although the limit of $4 billion has not yet been used by funds, the latest announcement is a good step.” Mr. Gupta added that the reforms indicate that mutual funds market in India will grow further as investors will have more options to invest. The stock markets are trading at all time highs and more investors will prefer to invest in Mutual funds compared to investing directly in stock markets.