Overseas indians’ equity limit up 2x

At a time when the foreign portfolio investors are fleeing the Indian stock market in hordes, the Union Budget has proposed to tap persons resident outside India (PROI) aggressively by more than doubling their investment limits in equities. Finance Minister Nirmala Sitharaman on Sunday proposed to increase the equity investment limit for a PROI to up to 10% of the paid-up capital from 5% and the combined limit of such investments to a maximum of 24% from 10%. With this new limit, experts said, PROIs will be encouraged to invest more aggressively in Indian equities directly. The proposal to hike the PROI investment limit comes at a time when the Indian equity market has been witnessing persistent sell-off by foreign investors. Foreign investors have sold shares of over Rs 1.95 lakh crore since 2025—the highest ever. Some of the reasons being the depreciation of the rupee, weaker-than-expected corporate earnings growth, higher uncertainty due to US trade and tariff policies, among others. The move is part of revised foreign exchange management rules to create a more user-friendly framework for offshore investors. Diversifying India’s Capital Base Portfolio investment schemes allow PROIs to invest in listed companies, as specified under the Foreign Exchange Management Act (FEMA), 2000. A PROI is an individual that does not meet FEMA’s residency criteria and the latest proposal on investment limit is expected to bring capital beyond NRIs and overseas citizens of India. “By opening direct access to individuals, India is diversifying its capital base. That should, over time, reduce volatility, improve liquidity and bring longer-duration money into the market,” said Mitesh Shah, chief executive officer of Equirus Family Office. This represents a structural shift, not a marginal tweak, Shah said, adding that foreign capital was flowing largely through institutional channels until now, including FPIs and offshore funds. Unlocking Patient Long-term Capital Enhancing participation thresholds under the portfolio investment scheme and raising overall foreign holding limits meaningfully widens the pool of long-term capital available to Indian companies. “With affluent Indian communities spread across West Asia, North America, Europe, and Southeast Asia, this can unlock a structurally stable source of capital that is typically more patient and aligned with India’s long-term economic trajectory,” said Divam Sharma, co-founder and fund manager of Green Portfolio PMS. These measures improve India’s capital market depth, diversify sources of foreign inflows, and reinforce the country’s positioning as a preferred destination for global investors seeking exposure to high-growth emerging-market opportunities, he added. However, a section of market participants is not hopeful that the move can bring major foreign investments to India. “I don’t see that (hike in investment limit) having a large impact because FIIs are not investing in India for certain reasons. Global markets are giving better returns and earnings are better (there),” said Dhananjay Sinha, chief executive officer and co-head of institutional equities at Systematix Group. NRIs’ investment will be a function of maximisation of profit as well as earnings while the return from the domestic market is negative, he added.