FII investment in MCX at trigger limit, more purchase on RBI approval

The Reserve Bank of India (RBI) has said the foreign institutional investors (FIIs) investment in Multi Commodity Exchange (MCX) has reached the trigger limit under portfolio investment scheme (PIS).

The central bank did not provide the trigger limit up to which FIIs can purchase equity shares in MCX.

"...the aggregate net purchases of equity shares in Multi Commodity Exchange of India Limited by Foreign Institutional Investors (FIIs) in the primary/secondary markets under PIS have reached the trigger limit," RBI said in a notification.

Hence, further purchases of equity shares of this company would be allowed only after obtaining prior approval of the central bank.

FIIs, Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under the scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India.

As of quarter ended June 2013, FIIs had 38.40 per cent equity shareholding in MCX, according to the data available on the Bombay Stock Exchange website.

RBI monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits, it has fixed cut-off points that are two percentage points lower than the actual ceilings. Once the aggregate net purchases of equity shares of the company by FIIs/NRIs/PIOs reach the cut-off point, it cautions banks not to purchase any more equity shares of the respective company on behalf of FIIs/NRIs/PIOs without its prior approval.