Foreigners get easy access to Dalal Street

India has allowed foreign individual investors, pension funds and trusts to directly invest in equities, in an attempt to shore up investor confidence and attract money from overseas to bridge widening current account deficit. Measures that boost capital inflows are high on the government’s agenda as the global downturn led by the Euro zone crisis has led to investors pulling money out of Indian equities. For India, the problem has been compounded by a slump in investor confidence because of policy inaction leading to a sharp fall in new projects. The finance ministry said in a statement on Sunday that the measures were intended to widen the investor class, attract more foreign funds, reduce market volatility and deepen the Indian capital market. The statement described the new category of investors as qualified foreign investors, or QFIs. The BSE Sensex shed close to 25% in 2011, making it the worst-performing major equity market in 2011. Record inflows — $29 billion in 2010 — turned into outflows as foreign investors sold shares.