UPA Govt.to Allow Foreign Investors(QFI) to Directly Invest in Indian Equity Market

  
QFI's can directly invest in indian stocks from Jan 15,2012
To begin the 2012 New Year on a liberalisation note,the CG announced its decision to allow Qualified Foreign Investors  (QFIs) to directly invest in the Indian equity market from January 15,2012.
  
Who is a QFI?
A QFI is an individual, group or association resident in a foreign country that is compliant with 'Financial Action Task Force' (FATF) standards. QFIs do not include FIIs/sub accounts.

  
Scope and Limit of Investments of QFI
Sebi and the RBI are expected to issue relevant circulars to operationalise the scheme allowing QFIs to directly invest in Indian Equity Markets.
RBI would grant general permission to QFIs for investment under the Portfolio Investment Scheme (PIS) route, similar to FIIs. 
The individual and aggregate investment limit for QFIs shall be 5 per cent and 10 per cent, respectively, of the paid-up capital of an Indian company.
These limits shall be over-and-above the FII and NRI investment ceilings prescribed under the PIS route for foreign investment in India.  

Earlier Position on Investments by Foreign Investors
Previously, foreign nationals were limited to investing in India's equity market through indirect routes such as mutual funds, or through institutional vehicles.In August 2011, the govt allowed foreign investors to directly invest up to USD 13 billion in equity and debt schemes of mutual funds

Effect on the decision of foreign investors investing directly in indian stocks 

The decision to allow foreign nationals to invest in Indian equities was a positive move but it was unlikely to result in an increased flow of overseas funds in the near-term due to weak market conditions -
1)Double-digit inflation
2)High Interest Rates and
3)Slowing Domestic Growth(economists predict growth below seven per cent for the fiscal year that ends on March 30,2012)