India may loosen rules to allow foreign individual investors to invest in the country’s share markets as part of moves to reform Asia’s third-largest economy, a report said yesterday.
A government panel set up to explore ways of increasing foreign capital inflows has urged the finance ministry make it easier for foreigners — in particular those of Indian origin — to buy shares on Indian exchanges, a person who worked on the panel told the Financial Times.
“The finance ministry has accepted the recommendations in principle as it wants to capitalize on India’s incredible growth by attracting more foreign investors,” Ashvin Parekh, a partner at consultancy Ernst and Young, who has been working with the finance ministry on the project, said.
Neither Parekh nor a finance ministry spokesman could immediately be reached for comment.
Foreign institutional investors were first allowed to invest in India 18 years ago. Foreign-owned brokers are common and trade directly on India’s exchanges, but individual or retail investors are banned from doing so.
Parekh said the plan to open the market to retail investors abroad had been passed on to India’s market regulator and central bank, which would have to create a framework to protect foreigners’ interests.
The proposal comes as India’s exchanges are upgrading technology to lure fast computer-driven trading that accounts for a large part of the activity on US and European bourses.
It also comes as the government seeks to raise about five billion US dollars by selling minority holdings in state-owned groups, including Oil India and Coal India.
India’s equity market has attracted much foreign institutional investor interest in the past six months, outperforming large emerging markets rivals.
Foreign institutional investors have poured nearly US$11 billion into Indian equities in the first seven months of this year, up from 7.45 billion rupees (US$161.7 million) during the same period last year.
Analysts expect inflows for this year to exceed the US$17 billion record hit in 2007 before the global financial crisis.
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