SEBI Expands Portfolio Management Services to Include Foreign Securities, IPOs and Mutual Funds

NEW DELHI — SEBI approved a revamp of portfolio‑management‑service rules on 25 September 2026 that permits PMS managers to invest in foreign securities, domestic initial public offerings and mutual funds, widening the scope of the industry that was valued at roughly ₹35 trillion last year.

Expanded investment universe for PMS

Under the new framework, PMSs can now allocate client assets to listed foreign equities, corporate and government bonds, exchange‑traded funds and other securities that are traded on recognised overseas exchanges. The move also authorises PMSs to participate in the underwriting of domestic IPOs, a privilege that was previously reserved for mutual funds and other institutional investors.

In addition to equities and debt, the guidelines allow PMSs to invest in foreign mutual funds and listed mutual‑fund units, provided the underlying assets are compliant with SEBI’s cross‑border investment rules. The policy also opens the door to short‑selling of foreign securities, a feature that was absent from earlier PMS regulations.

Regulatory framework and compliance

SEBI’s revised rules introduce a set of risk‑management and disclosure requirements tailored to the expanded asset classes. PMS managers must maintain a minimum net worth of ₹100 crore and provide a detailed portfolio‑risk report to clients whenever exposure to foreign securities exceeds 10 percent of the portfolio value. The guidelines also mandate that all foreign investments be settled through the International Securities Exchange (ISE) platform, ensuring compliance with global settlement standards.

Clients are required to complete a revised KYC process that includes a declaration of foreign investment intent and a statement of tax residency. SEBI has also updated its “Know‑Your‑Client” norms to capture cross‑border exposure, and will conduct periodic audits to verify adherence to the new limits.

Industry response

Financial‑services firms that operate PMS desks have welcomed the broadened mandate, noting that it will enable them to offer more diversified portfolios to high‑net‑worth clients. The guidelines are expected to attract foreign portfolio investors (FPIs) who previously could not access the PMS channel for Indian securities.

SEBI’s decision follows a series of consultations with market participants, including the Association of Mutual Funds in India (AMFI) and the National Stock Exchange. The board highlighted that the changes would bring the PMS sector in line with global best practices and help it compete with other asset‑management platforms that already offer cross‑border exposure.

Implications for the market

Analysts estimate that the new rules could add up to ₹10 trillion in assets under management within the first year, as PMSs tap into the growing demand for international diversification among Indian investors. The inclusion of IPOs also provides a new channel for early‑stage capital raising, potentially easing the pressure on mutual funds that traditionally dominate the IPO market.

SEBI has clarified that the expanded investment universe does not alter the existing limits on leverage or concentration. PMSs will still be capped at a maximum of 20 percent exposure to any single security or sector, and the overall portfolio must remain compliant with the 30 percent foreign‑asset ceiling that applies to all registered investment products.

Future outlook

With the new rules in place, SEBI expects the PMS industry to grow at a compound annual rate of 12 percent over the next five years. The board also plans to review the settlement framework for foreign securities quarterly to keep pace with evolving global market infrastructure.

As the first major regulatory shift in more than a decade, the changes signal SEBI’s intent to keep India’s asset‑management sector competitive in a rapidly globalising financial landscape.