Depositories Revise Foreign Portfolio Investment Limits For Stocks
FPIs have been on a selling spree ever since the government proposed a ‘super-rich tax’ in its budget, and with no respite in sight from the government, the quantum of net outflows shot up. (Photographer: Dhiraj Singh/Bloomberg)

Depositories Revise Foreign Portfolio Investment Limits For Stocks

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Depositories on Friday revised foreign portfolio investment limits for stocks listed on domestic stock exchanges.

With this, the FPI limit in some stocks has climbed up to 100 percent, market sources said. Besides, in some stocks FPI limits have been increased to their respective sectoral caps, they added.

Under Security and Exchange Board of India norms, depositories monitor the foreign investment limits in listed Indian companies. While the raising of FPI limits for stocks to respective sectoral caps by National Securities Depository Ltd./ Central Depository Services Ltd. is welcome, the current sentiments of FPI towards emerging market equities are not very conducive so as to attract flows just on the basis of this relaxation by depositories, said Deepak Jasani, Head Retail Research, HDFC Securities.

MSCI, on March 31, had said that it will wait for the practical implementation of these changes and the systematic implementation of the new sectoral limits applicable to Indian securities before making any changes to the MSCI index. It had said that it will provide further communication on this before June 30, 2020.

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Hence funds that do not follow MSCI Indexes, and are willing to bet more on India under the current circumstances, will be able to invest more in select Indian stocks based on relaxed limits, Jasani said. However, funds that follow MSCI Indexes would have to wait till at least June 30 or once the Ministry of Finance notifies these fresh limits after companies have been given time, beyond the original March 31, 2020, to restrict their FPI limits to a lower threshold, he added.

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