SEBI Allowed Indian MFs to Invest in Overseas Funds with Exposure to Indian Securities

Current Context: The Securities and Exchange Board of India (SEBI) has recently allowed Indian mutual funds (MFs) to invest in overseas mutual funds or unit trusts that have up to 25% exposure to Indian securities.

• This move aims to facilitate ease of investment, enhance transparency, and enable diversification of investments.
• Key Points:
• Investment Cap: Overseas mutual funds or unit trusts in which Indian MFs invest must have no more than 25% exposure to Indian securities.
• Transparency: These overseas funds are required to publicly disclose their portfolios at least quarterly.
• Single Investment Vehicle: All investor contributions to an overseas fund must be pooled into a single investment vehicle, ensuring equal rights for all investors.
• Observation Period: If the exposure to Indian securities exceeds 25% after investment, there is a six-month observance period for rebalancing. If rebalancing doesn't occur, Indian MFs have an additional six months to liquidate their holdings.

Question:

1 According to the SEBI’s latest update, What is the maximum exposure limit to Indian securities that overseas mutual funds or unit trusts can have for Indian mutual funds (MFs) to invest in them?

• A) 10%
• B) 15%
• C) 20%
• D) 25%

Answer: D) SEBI has allowed Indian mutual funds to invest in overseas mutual funds or unit trusts that have up to a 25% exposure to Indian securities.