India Inc welcomes direct investment by QFIs in equity market

NEW DELHI: India Inc today welcomed the government's decision to allow Qualified Foreign Investors (QFIs) to directly invest in the domestic equity market as it will help attract "a wider class of investors".

The government's move comes against the backdrop of significant foreign capital outflows from the domestic equity market in recent times, which has resulted in rupee volatility.

Welcoming the decision, industry body Assocham said the decision would "reverse the perception of a policy paralysis in governance for the time-being".

The chamber said it is a bold step to shore up investor confidence and attract dollar inflows.

"It is a positive signal to high net-worth individuals, who have been routing their investments through mutual funds or FIIs by way of participatory notes," it said.

However, it said the authorities must ensure that funds flow from Know-Your-Customer (KYC)-compliant countries.

Echoing the view, CII said given the recent volatility in the equity market, this positive move would also help boost investors' confidence and attract more foreign investment in the economy.

"Permitting QFIs to directly invest in Indian equity market will attract a wider class of investors into the Indian equity market and also help deepen the Indian capital market," CII said in a statement here.

Furthermore, it said at this juncture, it is important that the government makes a swift move to strengthen domestic financial institutions, particularly in the insurance and pension sector, which would help ensure the long-term stability of Indian capital markets.