QFI route widens direct access to Indian equities

On 1 January, the Indian government announced a major policy change to open the country’s equity markets to a much greater number of foreign investors. Under the new scheme, qualified foreign investors (QFIs) would be permitted to invest directly in public equity shares of Indian companies.

Earlier, QFIs were only allowed direct access to Indian mutual funds’ equity and debt schemes and only foreign institutional investors (FIIs), their sub-accounts and non-resident Indians (NRIs) were allowed to invest directly in Indian equity markets.

Recognizing the recent decline in FII investment flows, the QFI route was introduced to attract more foreign funds, widen the class of investors and strengthen the domestic capital markets. To effect the policy, the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), in circulars dated 13 January, issued detailed guidelines applicable to QFIs and depository participants (DPs) intending to undertake investment activities for QFIs.

Stephen Peepels, a partner in the corporate group in Hong Kong, heads the US capital markets team for Asia. Soni Tiwary is an associate in the capital markets group in Singapore. DLA Piper is the world’s largest legal practice with more than 4,200 lawyers in 76 offices across 30 countries.