What's holding back local ETF foreign inflows? Foreign ETFs

The local exchange-traded fund (ETF) market in India has been held back by regulations that hinder investments into them by foreign institutional investors, says an expert on the ETF industry.In an interview with CNBC-TV18, Deborah Fuhr of ETFGI.com, a research firm that specialises in the ETF industry, said that if overseas investors want to invest in India through the security, they prefer to invest in India ETFs that are listed abroad.“Rather than applying and being able to invest directly, it is just easier and faster to use an ETF listed in Europe and US where you don’t need to have approvals or any special permission," she said on the sidelines of the India Investment Conference organized by the NSE today."If it is easier to do it in US or UK, then investors will typically go there as opposed to getting regulatory approvals to be able to invest directly through ETFs in India,” she said.The Indian ETF market is dominated by the NSE, which in all has 30 ETFs that track its various equity indexes including the benchmark Nifty Fifty, 13 gold ETFs, along with a couple of liquid and world index ETFs.But the overall assets under management are dominated by the list of gold ETFs, along with the government's CPSE ETF, which is used for purposes of divestment.ETFs typically track their benchmark index passively, and are listed on exchanges and provide investors the advantage of taking exposure to an index directly through their brokerage accounts at low cost.Speaking on the issue, Sebi chief UK Sinha said he was open to tweaking norms based on regulations surrounding ETFs, if they helped deepen their presence of the product."Based on inputs from cross section of experts or participants if there is any need that further changes are required for rules and regulations of the ETFs, Sebi will be more than willing to listen to you and incorporate them," Sinha said at a conference here.