The Centre has no immediate plans to allow qualified foreign investors (QFIs) to directly purchase equities in Indian stock markets. This is even as QFIs are now permitted to invest in Indian mutual fund schemes — both equity-oriented schemes as well as debt schemes investing in the infrastructure sector.
“At present, no proposal is under consideration,” the Finance Minister, Mr Pranab Mukherjee told the Upper House in a written reply on Tuesday in response to a question on whether the Government was exploring the possibility of allowing QFIs to directly buy equities in Indian stock market.
QFIs are a new category of investors comprising non-resident investors other than SEBI-registered foreign institutional investors (FIIs) and SEBI-registered foreign venture capital investors (FVCI). The idea of allowing QFIs to invest in domestic mutual fund schemes was originally proposed by Mr Mukherjee in the 2011-12 Budget.
Investor class
The argument in favour of QFI participation in Indian mutual funds was that it would widen the class of investors, help increase depth and reduce volatility in the capital market.
Investment ceiling
Under the recently announced regulatory framework, QFIs can invest in Indian mutual fund schemes, through two routes—direct route (SEBI-registered depository participant route) and indirect route (Unit Confirmation Receipt Route). An overall investment ceiling (for both the routes) of $10 billion has been fixed for QFI investment in equity schemes.
In addition, an overall investment ceiling of $ 3 billion has been fixed for QFI investment in debt schemes which invest in infrastructure debt of minimum residual maturity of 5 years.