All qualified foreign investors may be allowed to trade in Indian equities

The government is considering a proposal to allow all qualified foreign investors (QFIs) to directly trade in equities in the local stock market, in a move that will let in retail and small investors overseas in the Indian market.

The move, aimed at further liberalisation of the Indian capital market, will also boost flows of foreign funds into the market, reports quoting official sources said today.

The idea is to allow qualified foreign investors (QFIs) to invest in Indian equities with no limits attached, sources said.

QFIs may be individuals or a group or association resident in a foreign country meeting know-your-customer guidelines and adhering to anti-money laundering and anti-terrorist financing guidelines.

Currently, the government allows high net worth foreign investors (with a minimum net worth of $50 million) registered as sub-accounts of a foreign institutional investors (FIIs) to invest in equities in the country.

While the move may be positive for Indian stocks, which are down nearly 20 per cent in 2011, its benefits to the economy as such is doubtful in the current market scenario, with so much of global uncertainty.
Foreign portfolio investors have bought Indian equities worth about $663 million so far this year, sharply down from the $29 billion they invested in 2010.