Overseas holdings of MFs fall 13.5% in FY23, outlay at $5.6 bn in March

Overseas investments of Indian mutual funds (MF) declined 13.5 per cent year-on-year (Y-o-Y) to $5.6 billion in March 2023, primarily due to a decrease in equity holdings, the Reserve Bank of India (RBI) said in a report on Friday.

At the same time, the investment of foreign investors in Indian MFs increased by 1.6 per cent (in dollar terms) to $18.7 billion. As a result, the net foreign liabilities of MFs increased to $13 billion from $11.9 billion.

The decline in foreign assets of MFs was primarily due to sharp corrections in foreign equity markets, especially in the US, since the majority of Indian MFs’ foreign investments are in the country’s equities. The Nasdaq index ended the financial year 2023, down 14 per cent Y-o-Y. According to the report,  81 per cent of the overseas investments are concentrated in the US and Luxembourg.

As a result, the value of foreign MF investments stood significantly below the $7 billion cap on investments in overseas assets. In addition, there is a $1 billion investment limit in overseas exchange traded funds (ETFs).

In January 2022, the Securities and Exchange Board of India (Sebi) imposed restrictions on foreign investments by fund houses as the value of their overseas holdings came close to breaching the $7 billion foreign investment limit set by the RBI. The central bank is yet to raise this limit. At present, MF schemes can invest in foreign instruments, provided they do not breach the February 2022 level.

Foreign hand

45% Share of UAE, US, UK and Singapore in total mutual fund units held by NRIs

67% Share of Japan and UK in FDI in Indian AMCs

$13,077 Net foreign liability of Indian mutual funds

Note: Data as on March 2023 Source: RBI