Capital markets regulator SEBI has equity-oriented exchange-traded funds and index funds to invest beyond 25 per cent of the net assets.
Earlier, mutual fund schemes were allowed to invest only 25 per cent of their net asset value in group companies of the sponsor.
Streamlining regulations norms for passive funds exposure to securities of group companies of the sponsor, SEBI has amended the norms to provide a level playing field.
In April, SEBI approved an amendment to the mutual fund rules to allow equity passive schemes to take exposure up to the weightage of the constituents in the underlying index.
However, the exposure would be subject to an overall cap of 35 per cent investment in the group companies of the sponsor.
In a notification issued on Tuesday, SEBI amended mutual fund rules, allowing equity-oriented ETFs and index funds to invest in the listed securities of group companies of the sponsor beyond 25 per cent of the net assets.
The 25 per cent investment cap in group companies has made it difficult for passive funds of large fund houses to replicate the underlying index, particularly when the sponsor group accounts for more than 25 per cent of the index.
The new norms have created a level playing field between large fund houses with listed group companies that are part of the index and others.
