Mutual funds unlikely to get a raise in overseas investment cap

Indian regulators are unlikely to permit any increase in the limit on mutual fund investments in overseas assets, in part because it could further pressure the rupee which is already at historic lows, said two people familiar with the matter.

There is a cap of $7 billion on total investments by Indian mutual fund schemes in foreign funds which actually hold the assets. There is a separate limit of $1 billion for local funds that invest in foreign exchange-traded funds (ETFs). A collapse in the value of some of those schemes has led to a demand for higher limits to help investors bring down their average investment cost.

“While Sebi has been in favour of an increase in the limit to help mutual funds to garner more funds, the central bank is reluctant to raise the limit,” said one of the people.