SEBI Approves Foreign Securities Investment and Equity Options Shorting for Portfolio Managers — September 25, 2026

In a landmark decision aimed at modernising India's rapidly expanding wealth management ecosystem, the Securities and Exchange Board of India (SEBI) has approved comprehensive reforms allowing Portfolio Management Services (PMS) to invest client funds in foreign securities and undertake short positions in equity options.

The approvals, cleared during the market regulator's 215th board meeting in Mumbai, will overhaul the SEBI (Portfolio Managers) Regulations. The move expands the mandate of India's PMS sector, whose assets under management (AUM) expanded to approximately ₹44.4 trillion ($463 billion) by August, driven by affluent domestic investors seeking tailored wealth strategies.

Opening Global Portfolios to High-Net-Worth Clients

Under the updated framework, discretionary and non-discretionary portfolio managers are permitted to deploy client capital into a wide range of international instruments.

Permitted Overseas Securities Include:

• Listed foreign equity shares
• Listed foreign debt securities and overseas sovereign bonds
• Overseas mutual funds, unit trusts, and exchange-traded funds (ETFs) regulated by foreign authorities
• Overseas Real Estate Investment Trusts (REITs) listed on recognised global bourses

The overseas investment window will operate under the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS), which permits resident individuals to remit up to $250,000 per financial year. Previously, PMS providers were barred from managing overseas securities directly, leaving wealthy domestic clients to manage global investments on their own, especially after the mutual fund industry exhausted its aggregate $7 billion overseas investment limit.

Shorting Equity Options and Derivatives Expansion

SEBI also substantially enhanced the derivative toolset available to portfolio managers. In a shift away from earlier hedging-only limits, PMS managers will now be allowed to take total exposure of up to 1.25 times a client’s AUM in exchange-traded derivatives.

Within this envelope, portfolio managers can now take uncovered short positions in equity exchange-traded derivatives. The flexibility to short stock options provides fund managers with institutional-grade risk management and absolute-return tools, allowing them to hedge against downside risks or monetize market volatility.

Introduction of PRIM and Lower Minimum Ticket Size

To widen investor participation, the regulator cleared a new investment route designated as the Portfolio Managers Route for Investing in Mutual Fund units (PRIM).

Key Features of the PRIM Framework:

• A reduced minimum investment threshold of ₹25 lakh (₹2.5 million), cutting in half the standard ₹50 lakh threshold required for conventional PMS offerings.
• Mandates investment solely through direct plans of mutual fund schemes, ETFs, index funds, and specialised investment funds.
• A cap on fixed management fees at 1% of client assets, while allowing performance-based fee structures.

Primary Issuances and Unlisted Debt Access

The regulatory overhaul also expands asset allocation choices in domestic debt and equity markets. Portfolio managers will now be permitted to participate in Initial Public Offerings (IPOs) and primary issuances in the debt market.

Additionally, discretionary PMS providers can allocate up to 10% of a client’s AUM to investment-grade, non-convertible unlisted debt securities, provided explicit client consent is obtained.

By aligning PMS capabilities more closely with Alternative Investment Funds (AIFs) and overseas investment vehicles operating out of the International Financial Services Centre (IFSC) at GIFT City, the updated regulations provide high-net-worth Indian investors with broader multi-asset and cross-border capabilities through regulated domestic managers.

Tags: SEBI Portfolio Management Services Liberalised Remittance Scheme Reserve Bank of India Wealth Management National Stock Exchange