By Siddhant Mishra
The Securities and Exchange Board of India (Sebi)’s decision to allow asset management companies (AMCs) to provide management and advisory services to all foreign portfolio investors (FPIs) operating from international financial services centres, or IFSCs, will give a significant boost to the GIFT City, said market and legal experts.
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The market watchdog has, however, set a condition that FPIs may invest only in mutual funds schemes other than those in the “thematic” category.
“Opening up of a previously restricted segment for AMCs would definitely increase their avenues for providing relevant management and advisory services. Allowing FPIs to invest in mutual fund schemes (except sectoral/ thematic schemes having minimum investment of 80% of total assets in equity) is likely to increase FPI flows, enhance liquidity, and is favourable with respect to the involvement of FPIs in Indian markets,” says Harish Kumar, partner, Luthra and Luthra Law Offices India.
Considering FPIs’ significant purchasing power, Kumar said the Sebi decision to exclude sectoral schemes from this relaxation — given that a sudden entry/exit of FPIs could result in higher volatility for an entire sector — was the right call.
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Earlier, the FPI categories permitted by Sebi were government-related investors, such as central banks, sovereign wealth funds, international or multilateral organisations/agencies, as well as appropriately regulated ones like pension funds, insurance/reinsurance firms, banks and fund houses.
These changes will open up the opportunity for AMCs to manage non-broad-based funds, which were prohibited, according to Vivek Mimani, partner, Khaitan & Co. He said in the process, this move will promote GIFT City as the preferred destination for investments into India.