The Securities and Exchange Board of India (SEBI) has introduced a significant regulatory change, permitting Portfolio Management Services (PMS) to invest client assets in a broader array of foreign securities. This move, part of a comprehensive overhaul of the PMS regulatory framework, opens up new avenues for eligible Indian investors seeking international market exposure through professionally managed portfolios.
What Foreign Securities Are Now Accessible?
Under the revised SEBI (Portfolio Managers) Regulations, 2026, both Discretionary Portfolio Management Services (DPMS) and Non-Discretionary Portfolio Management Services (NDPMS) can now invest in a diverse range of overseas assets. The newly approved list includes:
- Listed overseas equity
- Foreign debt securities
- Real Estate Investment Trusts (REITs) listed abroad
- Overseas mutual funds
- Exchange-Traded Funds (ETFs) and index funds
- Foreign government debt
This expansion means PMS managers are no longer confined to just overseas stocks. They can now construct more diversified global portfolios, potentially combining foreign equities with debt instruments and pooled investment products. The inclusion of foreign REITs also provides a pathway for exposure to international real estate markets via listed instruments.
Regulatory Compliance and Wider PMS Overhaul
It is crucial to note that all investments in foreign securities will be governed by existing Indian regulations, specifically the Foreign Exchange Management Act, 1999 (FEMA), and the Reserve Bank of India's Liberalised Remittance Scheme (LRS).
The provision for foreign securities is one component of SEBI's broader initiative to enhance the flexibility and efficiency of the PMS industry. Other key changes in the new framework include:
- Permission for PMS managers to invest in Initial Public Offerings (IPOs) and primary-market debt issuances.
- Discretionary PMS can now invest up to 10% of a client's Assets Under Management (AUM) in investment-grade, non-convertible, unlisted debt securities, provided client consent is obtained.
- Increased flexibility for investments in exchange-traded derivatives, allowing exposure up to 1.25 times the client's AUM.
SEBI has also streamlined the PMS rulebook, reducing its length by 53% and simplifying compliance. This comprehensive overhaul aims to foster the development of the PMS industry, ease regulatory burdens, and consolidate existing provisions, with the foreign securities allowance being a cornerstone of this restructuring.