India has been facing a bearish run
in terms of foreign investment in its capital markets. The poorly performing
market has churned out astonishingly bad results in the past year. So much so
that it reportedly prompted a net outflow of almost USD 380 Million in foreign investment in 2011.
To overturn this dismal trend, the
Ministry of Finance, Government of India announced on January 1, 2012 in a press
release, that it had decided to allow Qualified Foreign Investors [‘’QFIs’]
to invest directly in the Indian equity market. This is a welcome initiative
that should go a long way in dispelling the gloom that has gripped the Sensex. This is the second measure taken in 2011 to
increase foreign activity in Indian capital markets. The first was in August
when QFIs were permitted direct access to Indian mutual fund schemes.
The new scheme is expected to be
operationalised by January 15 after the regulators, the Reserve Bank of India
(RBI) and the Securities and Exchanges Board of India (SEBI), issue relevant
circulars, an official release said on Sunday.
The salient Features of the Scheme
are quoted below:
·
RBI would grant general permission to QFIs for
investment under Portfolio Investment Scheme (PIS) route similar to FIIs.
· The individual and aggregate investment limit for QFIs
shall be 5% and 10% respectively of the paid up capital of Indian company.
These limits shall be over and above the FII and NRI investment ceilings
prescribed under the PIS route for foreign investment in India.
· QFIs shall be allowed to invest through SEBI
registered Qualified Depository Participant
(DP). A QFI shall open only one demat account and a trading account with any of
the qualified DP. The QFI shall make purchase and sale of equities through that
DP only.
QFIs have been defined as
individuals, groups or associations residing in a foreign country that is
compliant with the Financial Action Task Force and that is a signatory to The
International Organisation of Securities Commissions's multilateral MoU. The
QFIs do not include FII/sub-accounts.
Dear Kartik ,
ReplyDeleteCould you clarify ? QFI's can trade only in the scrips issued by asset management companies such as mutual funds and if not in the regular equity and debt stocks trading on a platform of a Stock Exchange .
Dear Anon
ReplyDeleteAs it appears from the Press Release and a clarification to the same (See http://www.moneycontrol.com/news/ipo-news/foreign-individuals-can-investpublic-issues-_643974.html), QFIs can clearly trade directly as a retail investor.
It has been clearly notified that these QFIs can even take part in IPOs and FPOs. There is no such restriction as the one you have suggested in your query.