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MUMBAI: Following a Securities and Exchange Board of India (Sebi) directive to mutual fund houses in India to stop accepting subscriptions into schemes investing overseas, PPFAS Mutual Fund has stopped accepting inflows into PPFAS Flexicap Fund with effect from 2 February 2022. The stoppage is on account of the mutual fund industry as a whole hitting the limit of $7 billion for overseas investments stipulated by the Sebi.
The stoppage is likely to affect funds that are fully devoted to international investments as well as those investing a part of their corpus outside India. PPFAS Flexicap Fund invests up to 35% of its corpus in foreign stocks, primarily stocks of US technology companies. However, funds investing in overseas Exchange Traded Funds (ETFs) have a separate limit of $1 billion and may not be affected.
The industry-wide limit has been kept unchanged since 2008. A huge jump in flows into mutual funds investing abroad in the past year has pushed the industry towards the limit. Neither fresh lump sums nor fresh SIPs will be permitted in the PPFAS Flexicap Fund. Existing Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) will be allowed to continue. The fund house added that the suspension is likely to be temporary till Sebi raises the industry limit.
Other fund houses such as Motilal Oswal Mutual Fund have also stopped lump sums into their schemes investing outside India such as the Motilal Oswal S&P 500 Index Fund and Motilal Oswal NASDAQ 100 Fund of Funds (FoF). Franklin Templeton Mutual Fund also issued a notice halting flows into its overseas feeder funds on Saturday but a spokesperson for the fund house informed Mint that the notice was being withdrawn.
Fund houses are awaiting clarity from the Association of Mutual Funds in India (AMFI) and Sebi on this matter. There is a general expectation that Sebi will raise the limit given the high level of India's forex reserves which exceed $600 billion. US technology stocks have corrected in 2022 to some extent but interest in them among Indian investors remains high.
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