5th November 2005: The government is likely to relax norms which allow mutual funds to invest only in those companies abroad which have a 10% stake in a company in India. The options being considered by the government include allowing investment in any broad-based index such as the S&P 200.

“The existing norms have not had the desired effect and the government is reworking them to make them more attractive,” U K Sinha, who took over as chief executive officer of UTI AMC said. Sinha was earlier joint secretary in the finance ministry.

“There are hardly 42 companies which qualify for investment under the above norm and only about 13 of them are well known companies. Therefore, mutual funds do not really have much of a choice in terms of investment options,” A K Sridhar, chief investment officer, UTI AMC, said.

The existing investment norms allow mutual funds in India to collectively invest $1 billion in companies abroad, with each fund house being restricted to a sub-limit of $50 million. Further, mutual funds can only invest in those companies that have at least 10% stake in a company in India.