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The Securities and Exchange Board of India (Sebi) has advised mutual funds investing in overseas securities to stop further investments in foreign stocks to avoid breach of industry-wide overseas limits, two industry executives independently confirmed to Mint on the condition of anonymity.

Mutual funds can make overseas investments up to $1 billion per mutual fund, with the overall industry limit of $7 billion, according to a Sebi circular of 3 June 2021. The suspension is likely to be temporary and could be revoked once the limits are enhanced by the regulator.

Following the Sebi directive, the Association of Mutual Funds in India (Amfi) has asked fund houses to stop accepting flows in schemes investing overseas from 2 February. However, existing SIPs and STPs have been allowed to continue.

Franklin Templeton Mutual Fund released a notice on Saturday announcing suspension of lump-sum subscription, switch-ins, and fresh registration of SIP/STP for its three overseas funds, Franklin India Asian Equity Fund, Franklin India Feeder-Franklin US Opportunities Fund and Franklin India Feeder -Templeton European Opportunities Fund, after 28 January 2021. The fund house temporarily withdrew the notice, but may be forced to reinstate it after the Amfi guidance.

The Franklin Templeton move followed that of Motilal Oswal AMC, which also suspended lump-sum investments into its overseas funds with effect from 17 January.

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