SEBI approves new regulations to expand PMS and FPI investment options

The Securities and Exchange Board of India (SEBI) has approved the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, replacing the existing 2020 framework. The overhaul aims to deepen market participation, simplify compliance, and expand investment avenues for Portfolio Management Services (PMS).

Under the new rules, portfolio managers can now invest in a broader range of assets, including IPOs, primary market debt issuances, and various foreign securities such as listed overseas equities, debt securities, REITs, ETFs, index funds, and foreign government debt. Additionally, discretionary PMS providers may invest up to 10% of a client's Assets Under Management (AUM) in investment-grade, unlisted, non-convertible debt securities, subject to client consent.

SEBI also introduced reforms for Foreign Portfolio Investors (FPIs), allowing them to participate in physically settled, non-agricultural commodity derivative contracts, provided they exit positions at least three days before expiry. Furthermore, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are now permitted to issue depository receipts in overseas markets to attract foreign capital. All foreign investments remain subject to the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India's Liberalised Remittance Scheme (LRS).