A mutual fund wanting to invest
abroad could only buy stocks in companies that fulfilled two
The company must have a listed subsidiary in India (shares
are listed on the stock exchange for trading).
The global parent must own at least 10% of the listed Indian
This made it very difficult for funds to scout for good companies;
there are very few that pass this requirement, probably just
40 odd stocks. If the fund manager wanted to invest in good
stocks, especially in technology and telecom and other sectors,
he could not because these companies would not have listed Indian
subsidiaries. The Union Budget in February 2006 changed this.
The above restrictions have been removed. Mutual funds can
now invest in whichever stocks they deem worthwhile. Moreoever,
the ceiling on the aggregate investments made by mutual funds
in overseas instruments has been increased from $1 billion to