In order to introduce a new class of investors in the Indian equity market, the central government of India has now decided to allow qualified foreign investors (QFIs) to invest directly in the Indian equity market. This will not only open a new door for foreign cash, but also help to reduce market volatility in Indian stock market.
In simple words, qualified foreign investors (QFIs) are foreign individuals who invest under Indian equity market. As of now investment under Indian equity market by foreign individuals can be done using indirect routes such as mutual funds. Now with the permission of central government, foreign individuals can open a demat account through Securities and Exchange Board of India to invest directly under stock market.
At present, only wealthy foreign individuals or high networth individuals (HNIs) with minimum net worth of $50 million (approx. R260 crore) and registered as a sub-account of a foreign institutional investor (FII) are allowed to invest directly in the Indian local equities.
But w.e.f. 15th January 2012, QFI’s will also be allowed to directly buy or sell Indian equities by opening a demat account with SEBI.
Soon this will be notified by SEBI and RBI.
Foreign individuals will be allowed to remit money in any freely convertible currency such as US dollar, Euro, British Pound Sterling, French Franc through normal banking channels.
The individual and aggregate investment limit for QFIs shall be 5% and 10% respectively of the paid up capital of Indian company. These limits will be over and above the FII and NRI investment ceilings prescribed for foreign investment in India.