Chirag Mehta, Chief Information Officer (CIO), Quantum AMC, said that Sebi's directions for mutual fund schemes investing in ETFs listed on foreign exchanges will result in the mutual fund industry being set up in this category by the regulator. The announcement was made as the company approached the $1 billion investment limit.
This is reminiscent of the days when the industry hit a $7 billion foreign investment cap and had to stop the flow of funds investing in foreign stocks.
Mehta said these limits were probably put in place to limit foreign exchange outflows to reduce the impact on the balance of payments and thus on the Indian currency.
“As a result, these mutual fund schemes will have to restrict capital inflows. It has been a long time since these limits were in place and they are likely to be tightened,” he said. Ta.
According to Angel One, the Association of Mutual Funds of India (AMFI) has received a directive from the Securities and Exchange Board of India (SEBI) directing it to suspend new investments in ETFs that allocate funds to overseas markets.
The move comes as the Reserve Bank of India (RBI) approaches a breach of the ETF cap set by the RBI for overseas investments, currently at $1 billion of the industry-wide cap of $7 billion. It is.
From April 1, 2024, funds of funds (FoFs) that invest in exchange-traded funds (ETFs) listed on international markets will be required to stop accepting new investments.
According to Angel One, the move is in accordance with the regulatory framework aimed at maintaining compliance with RBI's prescribed limits on overseas investments by mutual funds.