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Funds can hedge forex risk on full Indian holdings

Overseas funds can hedge their entire foreign currency exposures arising from investments in Indian equities instead of just 15 per cent earlier, the Reserve Bank of India said on Friday.

They can already fully cover exposures arising from debt investments.

They can now buy a forward cover for the market value of all the shares they hold at the time of hedging, not for the actual amount they may have brought into the country, the Reserve Bank of India said in a statement.

But it said they could not rebook cancelled contracts.

So far, foreign funds could buy the forward cover for only up to 15 per cent of the market value of the shares they held.

The Reserve Bank of India also said that banks can invest up to 50 per cent of their equity capital or $25 million, whichever is higher, in overseas money market or debt instruments.

The earlier limit was 25 per cent of their equity capital or $15 million.

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