The Finance Minister's proposal in his Budget speech on Monday, to allow foreign investors to invest in mutual funds directly has evoked mixed response from fund houses. At present foreign institutional investors (FIIs), non-resident Indians and sub-accounts registered with the Securities and Exchange Board of India are allowed to invest in mutual funds.
It is generally felt that the present move would attract investment across the globe and bring in strong inflows in to the Indian mutual fund industry which had seen huge outflows in the past one year. However, taxation issues, know-your-customer (KYC) requirements and other procedures will have to be taken into account while investing in mutual funds.
But T. P. Raman, Managing Director, Sundaram Mutual Fund, feels that the move would impact the performance of the funds into which FII moneys come and go because they would not be long-term investors.
He says mutual funds will actually be handling hot money leading to a lot of volatility in assets under management.
