India: The government on Sunday gave a New Year gift to the stock markets by allowing qualified foreign investors (QFIs), including overseas individuals, to invest directly in Indian stock markets. So far, QFIs were permitted to invest only in mutual fund schemes.
“As a next logical step, it has now been decided to allow QFIs to directly invest in the Indian equity market in order to widen the class of investors, attract more foreign funds and reduce market volatility and to deepen the Indian capital market,” the finance ministry said in a statement. Detailed norms are expected to be issued by the Securities and Exchange Board of India (Sebi) over the next two weeks.
By allowing QFIs, the government is opening a new avenue for investment, earlier controlled by foreign institutional investors. Foreign nationals, who wanted to invest in Indian stock markets, came through the sub-account route. Non-resident Indians were, however, permitted to invest directly.
The move comes at a time when FIIs are withdrawing from Indian equity markets due to problems in their domestic markets.
