SEBI on FoFs: Due to the tremendous rally in American stocks in the last one year, the investment of such funds has reached the threshold of crossing the limit set by the Reserve Bank…
Market regulator SEBI has prohibited some mutual funds from taking fresh subscription. This instruction of SEBI is for those fund of funds which invest in exchange traded funds i.e. ETFs listed on foreign exchanges. These funds will not be able to take new subscriptions from April 1.
RBI has fixed this limit
Securities and Exchange Board of India (SEBI) has issued this new instruction at a time when the limit set by RBI in the respective funds is about to be met. The Reserve Bank of India has set a limit of investment of $ 1 billion in fund of funds investing in ETFs listed on foreign exchanges.
For this reason SEBI gave instructions
According to the data of Association of Mutual Funds in India, investment equal to 95 percent of the limit set by RBI for Overseas ETFs has already come. For this reason, the market regulator has prohibited such funds from taking fresh subscription from the beginning of the new financial year, so that the limit set by RBI is not violated.
No change for remaining funds
SEBI directed the ETF feeders of the Association of Mutual Funds in India to inform all fund houses about the new provision. SEBI has not made any changes in the provisions for other overseas feeder funds at present. Overseas feeder funds are those funds which also include foreign assets in their asset allocation.
Funds follow this index
The recent rally in the American stock markets is being said to be the reason for almost reaching the investment limit in ETFs listed on foreign exchanges. During the last few months, a significant rally has been recorded in American stocks, especially tech stocks. Most funds of funds investing in ETFs listed on American stock exchanges follow the Nasdaq 100 index. Nasdaq is primarily an index of tech stocks.
This share rose by 250% in a year
During the last one year, a rally of 44 percent has been recorded in the Nasdaq 100 index. Many stocks included in Nasdaq 100 have performed tremendously during this period. In the last one year, Amazon’s stock has increased by 78 percent, while Microsoft’s price has increased by 56 percent. The shares of Google’s parent company Alphabet have strengthened by 40 percent. In the last one year, shares of chipmaker Nvidia have risen the most on the Nasdaq 100 index, whose price has increased by up to 250 percent.
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