Published On:April 5 2008
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Investors get more scopes to diversify

Mumbai: Indian investors may get more opportunity to diversify globally with the Reserve Bank of India raising overseas investment limit for mutual funds for the fifth time in the last 20 months to $7 billion now.

'This will encourage the industry to look at launching more international funds,' said Anthony Heredia, executive director at the Indian fund unit of Morgan Stanley, adding that his firm was evaluating the option to launch such a fund.

After years of restricting foreign investment to those with at least 10% in a listed local firm, India's 2006-07 Budget allowed funds to invest freely in global stocks. The cap has gradually been raised to $7 billion.

'I think the doors are open far wider,' T P Raman, MD of Sundaram BNP Paribas Asset Management, said. 'We are seriously examining this and probably we will also be encouraged to launch more products,' Raman, whose firm launched its first global fund in 2007, said.

Mirae Asset Global Investment Management is also looking to offer emerging market funds in India, its head of marketing and corporate communications Hun Jun Jang said. India had 18 internationally-invested funds managing about Rs 10,500 crore at the end of February, nearly five times more than the amount they held a year ago, when there were only two such funds, data from fund tracker ICRA showed.

But the number and assets may rise with investors realising the utility of global funds, which have fallen significantly less than domestic mutual funds in the stock market correction so far this year, industry experts said.

'Given the volatility in the Indian markets, as a measure of diversification we can market this more vigorously,' said Raman, who sees the investment limit being raised further or scrapped.

Diversified equity funds have lost more than 28% on an average so far this year, data from fund tracker Lipper showed. Funds investing bulk of their assets globally have fallen about 8%, softening the blow to investors' portfolios. The benchmark BSE index has shed 22%, while the broader BSE 500 index has lost 28% in the same period.

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