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Mutual funds allowed to invest in global stocks. How it will impact MF investors

Mutual funds: SEBI approval will enable investors to have a proper diversified portfolio by investing in flexi-cap mutual funds that has a mandate to invest up to 30 per cent of its net exposure, say experts. (iStock)Premium
Mutual funds: SEBI approval will enable investors to have a proper diversified portfolio by investing in flexi-cap mutual funds that has a mandate to invest up to 30 per cent of its net exposure, say experts. (iStock)

  • Mutual funds: After this new SEBI guideline, fund managers will be able to invest in global equities that are available at discounted price these days after the recent sell-off triggered by the Russia-Ukraine war, believe experts

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Mutual funds house can now resume investing in global equity markets. As per the Securities and Exchange Board of India (SEBI), mutual fund (MF) houses can now resume investing in global equity markets within the aggregate mandated limit of $7 billion for the industry. According to investment experts, this will help long-term mutual funds investors to reap the benefit of global stocks being available at discounted price. They went on to add that mutual fund investors who believe in a diversified portfolio can now go for the flexi mutual funds, which has a mandate to invest in global markets up to 30 per cent of their net exposure. However, they said that the capital market regulator has not increased the investment limit. In fact, SEBI has allowed MF houses to resume investing in global equities as their limit of exposure had come down after the recent sell-off in equity markets.

Speaking on how this SEBI regulation will benefit mutual funds investor, SEBI registered tax and investment expert Jitendra Solanki said, "After this new SEBI guideline, fund managers will be able to invest in global equities that are available at discounted price these days after the recent sell-off triggered by the Russia-Ukraine war. Now, mutual fund investors will be able to get exposure of the global market."

The SEBI registered investment expert went on to add that such SEBI approval will enable investors to have a proper diversified portfolio by investing in flexi-cap mutual funds that has a mandate to invest up to 30 per cent of its net exposure.

On what kind of mutual fund investors will benefit from such SEBI's move, Pankaj Mathpal, CEO & MD at Optima Money Managers said, "Those who have a long-term time horizon will be the major beneficiary of this SEBI's approval as speculation are high about upcoming slowdown in the US economy due to high inflation and rising commodity prices. In such a scenario, global equity markets including Dalal Street is expected to remain highly volatile in short to medium term. In such a scenario, global stocks are expected to receive more beating as FIIs have already fished out a good amount from their portfolio. So, those who have long-term view are expected to benefit maximum from this move."

In its communication to AMFI last week SEBI said, "Mutual fund schemes may resume subscriptions and make investments in overseas funds/securities up to the headroom available without breaching the overseas investment limits as of end-of-day of February 1, 2022, at the mutual fund level."

A mutual fund launching a new scheme and intending to invest overseas is required to specify the amount it will invest outside India. Following the Sebi's direction, several fund houses like PPFAS Mutual Fund, DSP Mutual Fund and Edelweiss Mutual Fund, had stopped accepting inflows into their certain schemes with international mandates.

According to the mutual funds investment rules, domestic mutual fund houses can invest up to $7 billion in global stocks and an additional $1 billion in exchange-traded funds (ETF).

Disclaimer: The views and recommendations made above are those of individual analysts or personal finance companies, and not of Mint.

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