Qualified Foreign Investors (QFIs) Participation in Indian Stock Market

The Indian Government is doing its bit for widening the class of investors and going forward in this step we have good news as Qualified Foreign Investors (QFIs) will now be able to directly invest in Indian stock market and this will in turn bring more foreign funds, and reduce market volatility as depth will increase in the market.

Highlights of the new Scheme for Qualified Foreign Investors (QFIs) 

• RBI is likely to grant permission to Qualified Foreign Investors (QFIs) for investment under Portfolio Investment Scheme (PIS) route similar to FIIs.
• The individual investment limit for QFIs shall be 5% and 10% respectively of the paid up capital of Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India.
• QFIs will be allowed to invest only through SEBI registered Qualified Depository Participant (DP). A QFI can open only one demat account and a trading account with any of the qualified DP.
• DP shall ensure that QFIs meet all KYC (Know your Customer) and other regulatory requirements, as per the relevant regulations issued by SEBI from time to time. QFIs shall remit money through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category – I bank. Upon receipt of instructions from QFI, DP shall carry out the transactions (purchase/sale of equity).
• DP shall be responsible for deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs.

Can we Expect Participation by Qualified Foreign Investors (QFIs) in Year 2012 in India?

The answer to above question is likely to be a Big ‘No’ as Indian Share Market  is presently undergoing a  downtrend and already FIIs have lost a large chunk of their money in India in past one year. However, all is not lost and we will see them come in hoards as soon as situation becomes better for investment in India with reforms being brought about by the govt.