Foreign investors welcome to Indian mutual funds
Chennai: Indian mutual funds have welcomed Finance Minister Pranab Mukherjee's proposal to allow foreign investors to invest in their equity schemes though they say registering their funds overseas is going to be a challenge.
"It is a positive move. Now foreign investors can directly invest in Indian mutual funds schemes," Sandesh Kirkire, chief executive officer of Kotak Mutual, told IANS.
Presenting the budget for the fiscal 2011-12 in parliament Monday, Mukherjee said: "To liberalise the portfolio investment route, it has been decided to permit SEBI (Securities and Exchange Board of India) registered mutual funds to accept subscriptions from foreign investors who meet the KYC (know your customer) requirements for equity schemes. This would enable Indian mutual funds to have direct access to foreign investors and widen the class of foreign investors in Indian equity market."
Currently, only foreign institutional investors (FII) and sub-accounts registered with the SEBI and non resident Indians (NRIs) are allowed to invest in mutual fund schemes.
According to Kirkire, foreign investors would get units in Indian rupees while investments in dedicated India funds would get them units in US dollars.
"The investor has to be comfortable with that. The one challenge for the industry is to register the fund in jurisdictions where the funds are to be marketed," Kirkire added.
He said equity investors as a tribe in India constitute only a small percentage. Making the Indians to invest in a mutual fund is itself a challenge.
The scrapping of entry load charged by mutual funds by SEBI has dried up fresh mobilisation for many schemes. The entry load is the sum out of which mutual fund companies paid its distributors commissions.
Welcoming the government's move, the managing director of Sundaram Mutual, T.P. Raman, said: "The proposal would give necessary depth to the Indian equity market."
According to Pinaki Bhadury, vice president of Frost and Sullivan, the government's proposal is a growth driver.