India’s Portfolio Management Services, or PMS, market is moving towards a major change. SEBI has approved a new regulatory framework for portfolio managers, under which the scope of their investments will expand to IPOs, primary market debt issues, foreign securities and direct mutual fund plans. Along with this, several compliance rules have also been eased.
This change has come at a time when the size of the PMS industry has grown rapidly. According to SEBI’s July proposal, assets managed under portfolio management services had risen from Rs 18.07 lakh crore in April 2019 to Rs 42.61 lakh crore by May 2026.
Let us understand SEBI’s new PMS rules in detail and know what the expanding investment options mean for investors and portfolio managers.
What’s Happening?
The SEBI board has approved the Securities and Exchange Board of India (Portfolio Managers) Regulations, 2026, which will replace the existing 2020 framework. The objective of the new rules is to expand the investment options available to portfolio managers while simplifying the regulatory and operational process.
Under the new framework, portfolio managers have been permitted to invest in IPOs and primary market issues of the debt market. Along with this, with the client’s consent, a maximum of 10% of the client’s AUM can be invested in investment-grade, unlisted non-convertible debt securities.
The minimum ticket size for PMS investment will remain Rs 25 lakh. Apart from this, investment in ETFs can be made up to 1.25 times the client’s AUM. This will give PMS managers more options for building portfolios than before.
Investment Scope Expanded from IPO to Foreign Securities
With the new PMS rules, the investment universe of portfolio managers has expanded. Now, portfolio managers providing both discretionary and non-discretionary services will be able to invest in IPOs and primary issues of the debt market. Apart from this, they will be permitted to invest in overseas listed equity and debt, REITs, foreign mutual funds, ETFs, index funds and foreign government debt.
However, such investments will be subject to the applicable rules of the Foreign Exchange Management Act and RBI’s Liberalised Remittance Scheme. SEBI has also permitted Indian-registered portfolio managers to manage and advise overseas funds investing in foreign securities. This can open the way for the Indian PMS industry to expand its role beyond domestic assets into global investment management.
Major Change in PRIM and Compliance
SEBI has also introduced Portfolio Managers Route for Investing in Mutual Fund Units, or PRIM. Under this, portfolio managers will be able to invest clients’ money in direct mutual fund plans of Indian AMCs, ETFs, index funds and specialised investment funds.
For PRIM, the minimum ticket size has been set at Rs 25 lakh and the minimum net worth at Rs 2 crore. There will be a 25% limit on investment in schemes of affiliated, group or associate AMCs. The fixed management fee will be a maximum of 1% of the client’s AUM, while a performance-based fee model has also been permitted. Relief will also be available from provisions related to exit load in PRIM.
SEBI has also introduced the concept of Independent Fund Managers, or IFMs. IFMs will be able to manage client portfolios together with a registered portfolio manager, but the full responsibility for their activities will remain with the concerned registered PMS.
Rules have also been simplified on the compliance front. According to SEBI, the size of the regulations has been reduced from 70 pages to 33 pages, that is, a reduction of about 53%, while the total word count has been reduced by about 42%. Portfolio managers with AUM of less than Rs 100 crore have been exempted from the requirement of a dealing room if they have an adequate audit trail and internal controls.
What Does This Mean for Investors?
From an investor’s perspective, the biggest change is the additional flexibility available to portfolio managers. Access to IPOs, the primary debt market, foreign equity, debt, REITs, foreign funds and Indian direct mutual fund plans can increase the scope for spreading the portfolio across different asset classes.
Retaining the existing minimum PMS investment of Rs 25 lakh means that the benefit of these new options can be provided within the same existing PMS framework. Meanwhile, the permission to invest up to 10% in investment-grade unlisted non-convertible debt gives managers one more option for asset allocation.
However, with more investment options, the portfolio structure can also become more complex. Therefore, the actual impact of these changes will depend to a large extent on how PMS managers use different asset classes according to the client’s risk profile and investment strategy.
What’s Next?
SEBI’s decisions are not limited only to the PMS sector. The regulator has also permitted Foreign Portfolio Investors, or FPIs, to participate in physically settled non-agricultural commodity derivatives. However, they will have to square off or roll over their positions at least 3 days before the contract expiry.
According to Reuters, this will increase foreign investors’ access to the commodity derivatives market, and there is a possibility of an increase in trading volume, especially in the bullion market. SEBI has also expanded the scope of accredited investors. Now, individuals with Rs 5 crore and body corporates with Rs 20 crore based on securities market assets will also be eligible.
Overall, these changes indicate that SEBI is moving forward in the direction of expanding investment options in the Indian capital market, simplifying the regulatory process and strengthening the market’s linkage with foreign investment and global fund management.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
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