Govt likely to allow QFIs to invest in equity markets directly

With an aim to further liberalise the capital market, the government is contemplating to allow foreign individuals - Qualified Foreign Investors (QFIs) - to buy equities directly in stock markets, a senior Finance Ministry official said.

At present, only overseas High Networth Individuals (with a minimum networth of USD 50 million), which are registered as sub-account of Foreign Institutional Investors (FIIs), are allowed to participate in the stock market.

"We are exploring the options to widen the class of investors in the Indian equity market by allowing QFIs," the official said.

The decision, he added, would help in projecting India as a global investment centre and attracting equity capital from abroad.

The move is being considered at a time when the stock markets are volatile due to debt problems in several advanced economies and concerns on domestic fronts, like inflation and high

rate of interest.

Besides, there are concerns over flight of foreign capital in the recent times. FIIs have pulled out Rs 632 crore (Rs 6.32 million) from Indian equities so far in 2011.

In order to promote the portfolio investment route, the Government last month allowed QFIs - individual, group or association - to invest up to USD 13 billion in equity and debt schemes of mutual funds in the infrastructure sector.

"We are trying to collect and analyse data on QFI investments in mutual funds," the official said, adding the decision has made it easier for overseas investors to participate in the infrastructure sector projects in India.

While the official did not provide further details regarding QFIs in capital market, he said, if allowed, it would be on the same pattern as in mutual funds.

For mutual funds, the government has allowed two routes -- holding mutual fund units in demat account through Sebi registered depositary participants and holding MF units via Unit Confirmation Receipts.