RBI Eases Equity Access for NRIs and Overseas Investors

Reserve Bank of India's Move to Boost Foreign Investment in Indian Equity Markets

The Reserve Bank of India (RBI) has increased the limits for investment in India's equity markets by non-resident Indians (NRIs), individual Persons Resident Outside India (PROIs), and overseas citizens of India (OCIs) with SEBI registration. However, experts believe that this move is unlikely to significantly impact foreign flows into the country.

The RBI has hiked the limit for individual residents under OPI or overseas portfolio investment in listed securities from 10 percent to 24 percent. While the policy direction is largely positive, the measures are expected to take time to have a significant impact on foreign flows. Participation in the segment is likely to see a gradual increase, rather than a sudden jump.

As of May, the total holdings of NRIs in the domestic markets amount to around Rs 5.2 lakh crore, which is a fraction compared to the total market capitalisation of Rs 461 lakh crore. Gopal Jain, Managing Director & CEO of Gaja Alternative Asset Management, believes that this move will support liquidity, improve ease of access, and reinforce India's attractiveness as a long-term investment destination.

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According to Jain, the reduction in compliance friction and improved accessibility for incremental marginal buyers is directionally positive from a foreign flows perspective. However, Nirav Karkera, Head of Research at W by Groww, does not expect an immediate uptick in foreign flows. Karkera noted that the news needs to reach investors and they need to understand the change before any significant impact can be seen.

Vikas Gupta, CEO of Omniscience Capital, concurred that the move does not mean an immediate surge in inflows. Instead, Gupta believes that there is meaningful long-term interest among NRIs and OCIs in investing in India. He added that when the rupee weakens, NRIs receive more rupees for every dollar they remit, making Indian assets more attractive to those looking to invest rather than simply send money home.

The RBI's move is a positive measure to improve gradual incremental participation and build foreign confidence in domestic investing regulations. This will add structural support to the slow-building case of an India re-entry by foreign investors, according to Karkera.

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