Investors will not be able to make fresh investments in mutual fund schemes with exposure to overseas stocks from Wednesday.
The Association of Mutual Funds in India (AMFI) has asked all fund houses to suspend flows into schemes that invest in foreign securities starting February 2 following a nudge from the Securities and Exchange Board of India (Sebi) with the industry close to breaching the existing overseas investment limits.
AMFI has asked mutual funds to stop lump sum and and fresh systematic investments into such schemes from February 2, according to a circular sent to mutual funds on Sunday.
“AMCs shall not make any incremental investments in overseas funds or securities beyond what is existing as of February 1, 2022, at the respective mutual fund level,” said the AMFI circular. “In other words, the total utilisation by each AMC of the overseas investment limit shall be capped at the amount as of EOD of February 1, 2022 in order to comply with SEBI Direction.
Mutual fund schemes investing in overseas ETFs, however, can continue accepting investor money as this category has a separate limit, which is yet to be breached.
Sebi has set a cap of $7 billion on the mutual fund industry’s investment in overseas stocks. Industry sources said mutual funds have crossed 95% of this limit. It is up to the Reserve Bank of India to increase this limit.
On Sunday, PPFAS Mutual Fund, in a notice to investors, said it was suspending fresh investments from February 2 into its flagship scheme, Parag Parikh Flexi Cap Fund, a scheme with assets under management of ₹19,933 crore that invests in a mix of domestic and international equities. However existing SIPs and STPs would continue.
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