India’s markets regulator on Friday proposed a series of changes to mutual fund scheme rules, including allowing asset managers to offer both value and contra funds under certain conditions.
The Securities and Exchange Board of India, in a consultation paper published on its website, suggested permitting mutual funds to offer both value and contra funds provided the overlap in their investment portfolios does not exceed 50%.
Value funds typically invest in undervalued companies, while contra funds invest against prevailing market trends. Under current regulations, asset managers are allowed to launch only one of these two.
India’s mutual fund industry hit a new record in June, with net assets under management climbing to nearly 75 trillion rupees ($870.95 billion).
SEBI on Friday also sought feedback on whether mutual funds should invest the residual portion of their equity scheme funds in a diversified mix of assets such as debt, gold, silver and real estate investment trusts.
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Equity schemes must invest a minimum 65% of their funds in equity-related instruments, and the rest can be parked in debt or money market instruments.
The regulator sought feedback on whether mutual funds should be permitted to invest the residual portion of debt scheme funds in real estate investment trusts and infrastructure investment trusts, except for schemes with short durations.
SEBI has sought comments by August 8.
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