Good days are just around the horizon for the mutual fund industry. The finance ministry is about to open the flood gates of foreign investment which was hitherto under regulation. With this new scheme of things, foreign individuals would be allowed to make investment directly in to the mutual fund market in India. Initially, the government has proposed a cap of $ 10 billion or Rs 45,000 crores subject to revision every six months. For the mutual fund industry which was running dry due to the entry load ban will now see their coffers slush with foreign investment.
As of now total assets under the management of the mutual fund bosses is up to the tune of Rs 731,448 crores. The Securities and Exchange Board of India (Sebi) will unveil the guidelines pertaining to this de-regulation on August 1. The entry of this new type of foreign investment would potentially prove to be instrumental in the growth of mutual fund industry.
The obvious advantages cited by the pundits are basically twofold. One, the average period for which a foreign individual holds the mutual fund is greater than their local counterparts. Second, the mutual fund investors in other countries do it on a larger scale. So this will ultimately culminate in to greater depth of the financial markets, needless to say, would be beneficial towards the stability of the market.
It is not all hunky dory for the markets as the reverse also holds true. Market sentiments, these days are decided by the inflow or the outflow of foreign capital. The current dip in the market is also attributed to this phenomenon.
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