SEBI has allowed mutual funds, AIFs and PMS to invest in securities of International Financial Services Centres (IFSCs).
An IFSC does not follow domestic economic law; instead, they follow international practices. IFSCs deals with flows of finance, financial products and services across borders. Companies setting up offices in IFSCs cannot deal in local currency. In addition, IFSCs can provide fund raising services for individuals, corporations and governments and wealth management services to foreign investors. In India, Gandhinagar has one IFSC called Gujarat International Finance Tec-City (GIFT)
Fund houses can now invest in securities, which are listed in IFSCs, securities issued by them and securities issued by the companies incorporated in India.
Experts say that the move may help AMCs. “Only established companies set up offices in FPSCs. In future, stock exchanges having presence in IFSCs may list companies having businesses in IFSCs helping AMCs to invest in such companies to diversify the scope of investments,” said Manoj Nagpal of Outlook Asia Capital.
However, a few experts have a different opinion. “There will not be any significant impact of this circular as IFSCs will take time to pick up in India,” said a fund manager of a large fund house.
Currently, fund houses can accept investments from foreign investors through FPI route. In addition, they can invest in securities of foreign companies but such scrips are treated as debt securities for taxation purpose.
