The Securities and Exchange Board of India (SEBI) has allowed Indian mutual funds to invest in foreign mutual funds or unit trusts. However, this investment is possible only up to a limit. Indian funds can invest only 25% of their total assets in foreign securities.

The aim of this new rule is to make it easier for Indian mutual funds to invest abroad and also ensure greater transparency in the management of these investments.

It allows Indian mutual funds to better diversify their investments by including foreign funds in their portfolios. These new guidelines have come into effect with immediate effect. However, SEBI has also laid down some special conditions for these investments, which are as follows - No separate portfolios The contribution made by Indian mutual funds to these foreign funds should be deposited through a single investment vehicle. This simply means that there should not be different or "side" vehicles for different investors. Apart from this, foreign mutual funds should operate as a "blind pool". This means that there should not be different portfolios for different investors. All investors in these foreign funds will have equal rights on the returns of the fund. This will be based on how much they have invested, which will ensure fairness. Advisory agreements also banned SEBI has also banned any advisory agreements between Indian mutual funds and foreign funds to avoid any potential conflict of interest. This ensures that decisions are taken in the interest of all investors without any external influence. If a foreign fund exceeds the 25% limit, Indian mutual funds will have 6 months to see if the foreign fund resolves the issue. Only then can they invest more money. During the 6-month period, Indian mutual fund schemes will not make any fresh investments in such foreign mutual funds or unit trusts. However, if the investment in Indian securities by such mutual funds or unit trusts falls below the 25% limit, Indian mutual funds may resume their investments in such foreign mutual funds or unit trusts.