The Securities and Exchange Board of India (SEBI) has instructed the Association of Mutual Funds of India (AMFI) to halt the acceptance of inflows into funds investing in overseas ETFs. This directive comes after the mutual fund industry reached its $7 billion limit for investing in foreign stocks and funds over two years ago, prompting a suspension of inflows into such overseas mutual funds.
Since hitting the $7 billion threshold in January 2022, SEBI had previously directed fund houses to refrain from further investments in overseas securities. Presently, the cap for investing in overseas ETFs stands at $1 billion and is nearing exhaustion.
There are two categories of mutual fund schemes investing in overseas markets: those directly purchasing foreign shares (with a $7 billion limit) and those, typically Fund of Funds, buying units of ETFs abroad (with a $1 billion limit). Fund houses are now required to cease accepting investments in these Fund of Funds or ETFs investing in overseas ETFs.
Currently, there are more than 75 mutual fund schemes in India investing overseas, with the previous $7 billion cap still in effect for other overseas funds.
In 2023, SEBI allowed fund houses to resume investing in foreign stocks if their assets under management had declined due to corrections in overseas markets, leading to a reduction in their assets under management.
The acceptance of investments by overseas mutual funds fluctuates based on their proximity to upper investment limits for overseas investments. The flow of funds into such schemes has been variable thus far.
On February 26, four funds from Nippon India Mutual Fund – Nippon India US Equity Opportunities, Nippon India Japan Equity, Nippon India Taiwan Equity, and Nippon India ETF Hang Seng BeES – ceased taking investments, with existing registered Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) continuing.
Notably, the Fund of Funds and ETF variants of the US-focused Mirae Asset NYSE FANG were the top-performing funds in 2023, delivering approximately 100 percent returns during the year.
Currently, most global funds, except ETFs, are open to fresh investments, subject to changes based on available headroom for fund houses.
SEBI Directs Mutual Funds to Halt Inflows into Overseas ETFs Amid Investment Limitations
I’m Abhishek Sharma, an Advocate based in Delhi, entrepreneur, investor, and founder of BigBreakingWire. I am an enrolled Advocate with a strong interest in entrepreneurship, media, and technology. I founded BigBreakingWire, a digital news platform covering breaking news, business, financial markets, companies, and important developments in India and around the world. I also have a software company and take an active interest in technology, software, AI, digital products, and new business ideas. As an investor, I’m interested in discovering and investing in promising businesses and startups. I look for good ideas, strong founders, practical business models, and opportunities with long-term potential. I enjoy building businesses, learning about new industries, and connecting with people who are working on interesting ideas and opportunities. Advocate | Entrepreneur | Investor | Founder & Editor-in-Chief, BigBreakingWire
Disclaimer: BigBreakingWire provides news and informational content for general educational purposes only. The information presented on this website does not constitute financial, investment, tax, or legal advice. Readers should consult qualified professionals before making any financial decisions. BigBreakingWire, its authors, and editors are not responsible for any financial losses or damages arising from the use of information on this site.
