Market regulator Securities and Exchange Board of India (SEBI) has allowed mutual funds to resume investing in foreign stocks within USD 7 billion, which is the aggregate mandated limit for the industry.
SEBI’s decision comes in the backdrop of a correction in global markets that brought down the international stocks' valuation.
In January, SEBI had told mutual fund houses to stop taking new subscriptions in schemes that were investing in overseas stocks. The directive was mainly due to the mutual fund industry crossing the mandated USD 7 billion limit for overseas investments. The latest meltdown in global stocks reduced the cumulative value of investments made by all the mutual fund houses together.
"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 1 February 2022, at the mutual fund-level," SEBI clarified to the industry body Association of Mutual Funds in India (AMFI). The regulator said mutual funds “may utilise the headroom available in the overseas investment limit due to redemptions and consequent sale of overseas securities post 1 February 2022”. Effectively, the investing limit has not been enhanced, but fund houses are now allowed to invest to the extent that they have sold international equities from February 1 till now.
The regulator has also asked AMFI to ensure that the total utilisation of the overseas limit by each AMC or mutual fund remains capped at the February-level. SEBI had specified an overall industry level limit of $7 billion for mutual funds to invest in overseas securities and an individual limit of $1 billion for each scheme.
The regulator's approval came after AMFI made a request to SEBI for reviewing investment in overseas securities by mutual funds. Meanwhile, Edelweiss Mutual Fund announced that it will be accepting inflows in its international schemes from Tuesday. The schemes are — 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.
Following the SEBI's previous direction, several fund houses, including PPFAS Mutual Fund, DSP Mutual Fund and Edelweiss Mutual Fund, had stopped accepting inflows into their certain schemes with international mandates. The markets regulator has set an overall industry-level limit of USD 7 billion for mutual funds to invest in overseas securities and funds and a separate limit of USD 1 billion for investment in overseas ETFs.
Mutual funds that have sold stocks of overseas-listed companies to meet investor redemptions will be able to reinvest in overseas-listed stocks.
Edelweiss MF, Nippon India MF, ICICI MF announce re-opening of funds, Mirae MF reopens with restrictions. PPFAS MF says it can’t reinvest in overseas-listed stocks as it had not sold any stocks since 1st February, Motilal Oswal MF will continue with suspension of fresh investor flows.
Mirae Mutual Fund announced reopening of international schemes but with certain restrictions. SIP investments will not be allowed - existing or fresh. Only fresh lumpsum investments will be allowed, upto Rs2 lakh per day, per investor, per scheme. These will apply to Mirae Asset NYSE FANG+ ETF Fund of Fund, Mirae Asset S&P 500 Top 50 ETF Fund of Fund and Mirae Asset Hang Seng TECH ETF Fund of Fund.
Edelweiss ASEAN Equity Off-Shore Fund, Edelweiss Greater China Equity Off-Shore Fund, Edelweiss US Technology Equity Fund of Fund, Edelweiss Emerging Markets Opportunities Equity Offshore Fund, Edelweiss Europe Dynamic Equity Offshore Fund, Edelweiss US Value Equity Off-Shore Fund and Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund will be open for fresh SIPs, lumpsum investments and systematic transfer plans.
Nippon India MF has also announced opening up of its schemes – Nippon India US Equity Opportunities Fund, Nippon India Japan Equity Fund, Nippon India Taiwan Equity Fund, Nippon India Multi Asset Fund and Nippon India ETF Hang Seng BeES.
ICICI Prudential MF has reopened its schemes - ICICI Prudential US Bluechip Equity Fund, ICICI Prudential Global Stable Equity Fund (FOF), ICICI Prudential Global Advantage Fund (FOF) and ICICI Prudential Nasdaq 100 Index Fund - for fresh SIP registrations and lumpsum investments.