QFIs permitted to invest in Indian equity markets

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The government has decided to allow qualified foreign investors (QFIs) to directly invest in Indian equity markets so as to widen the investor class, attract more foreign funds and reduce market volatility. The announcement, in a 1 January press release, comes shortly after QFIs were given the go-ahead to invest in mutual funds.

Stock_Market-CMYKIn the past, only foreign institutional investors (FIIs) and sub-accounts, and non-resident Indians (NRIs) could invest in Indian equity markets. QFIs exclude FIIs and sub-accounts. According to the press release, QFIs include individuals, groups or associations that are resident in a foreign country which is compliant with the Financial Action Task Force standards and which is a signatory to the International Organization of Securities Commissions’ Multilateral Memorandum of Understanding.

The press release further stated that the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) were soon expected to issue the circulars needed to bring the proposed new regime into operation.

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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.

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