Indian asset management companies recently launched an array of international funds to diversify the portfolio of Indian investors.
In September 1999, the Securities and Exchange Board of India (Sebi) issued a circular restricting overseas investments only to an American Depository Receipt (ADR) or a Global Depository Receipt (GDR) and that also only of Indian companies, provided the investments did not cross the limit of $500 million (Rs2,015 crore). An ADR is a certificate issued by a bank in the US representing a certain amount of shares of a foreign company on a foreign exchange. They can be traded on American exchanges just like domestic stock. GDRs are similar. Under the 1999 circular, mutual funds only could invest in those foreign companies that had a 10% stake in an Indian company listed in a recognized Indian stock exchange. Therefore, for Indian mutual funds, the universe of stocks was restricted to about 47 companies.
Sebi revised its policy recently allowing investments in ADRs/GDRs of global companies. Under the revised guidelines, mutual funds now can invest in ADRs/GDRs/foreign securities within an overall limit of $3 billion (Rs12,090 crore). The rider is a sub-ceiling for individual mutual funds—the investment should not exceed 10% of the net assets managed as on 31 March of each fiscal and subject to a maximum of $150 million (Rs604.5 crore) per mutual fund.
Deutsche Asset Management (India) Pvt. Ltd last Tuesday launched an open-end overseas fund. So far, Fidelity Mutual Fund, Kotak Mahindra Asset Management Co. Ltd, DSP Merill Lynch and Sundaram BNP Paribas have joined the overseas markets bandwagon.