The Securities and Exchange Board of India (SEBI) enforces a ban on asset managers investing in foreign exchange traded funds (ETFs) effective April 1, 2024.
This prohibition prevents asset managers from channeling funds into schemes utilizing foreign ETFs.
Background and Rationale
The move by SEBI follows industry investment exceeding the $100 crore mark, prompting regulatory action.
Experts attribute this measure to regulatory concerns stemming from data collected up to March 21, 2024.
No Restrictions on Foreign Securities
While the ban applies to investing in foreign ETFs, there are no restrictions on subscribing to funds allocating assets in foreign securities.
This delineation ensures investors maintain access to foreign markets through alternative investment channels.
Precedent of Regulatory Intervention
This isn’t the first instance of SEBI imposing restrictions.
Similar measures were enacted approximately four years ago amid global financial market corrections.
Back then, Indian fund houses were limited to investing $700 crore in foreign stocks.
The reiteration of the ban underscores regulatory vigilance in managing market dynamics.
Impact on Investor Portfolios
The ban on investing in schemes tied to foreign ETFs restricts investors’ ability to augment or diversify their exposure to international markets temporarily.
Consequently, portfolio adjustments may necessitate alternative strategies to navigate market uncertainties.
