With India having allowed Mutual funds to invest in foreign stocks with a cap of $ 5 billion only about $ 882 million of this capacity was utilised as Indian prefer investing in domestic stocks than foreign ones. The Indian investors feel that at a time when the foreign funds are coming into India for being invested, they should not be investing in foreign stocks. The geographical diversification offered by these foreign funds hold little value to the Indian investors. Moreover the tax regulations also add to this by placing a restriction on investments which are more than 35% of the assets. Such investments in excess of this are taxed at a higher rate. So despite the rise in the cap the tax regulations still dampen the purpose of this increased cap.

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