In a landmark move to deepen the Indian capital markets, Finance Minister Nirmala Sitharaman announced in the Union Budget 2026 that Individual Persons Resident Outside India (PROI)—a category including NRIs and PIOs—are now permitted to invest directly in listed Indian equities through the Portfolio Investment Scheme (PIS).
The reform is a strategic pivot to diversify India’s foreign capital pool, moving beyond large institutional flows to attract long-term, individual retail participation from the global Indian diaspora.
1. The New Investment Caps
The government has significantly expanded the “headroom” for overseas individuals to take meaningful stakes in Indian companies.
| Investment Limit Type | Old Limit (FY25) | New Limit (Budget 2026) |
| Individual PROI Limit | 5% of company equity | 10% of company equity |
| Aggregate PROI Limit | 10% of company equity | 24% of company equity |
- Direct Access: Previously, much of this capital was routed through complex Foreign Portfolio Investor (FPI) structures. Individuals can now invest directly, reducing administrative hurdles.
- Wider Scope: The 24% aggregate cap allows multiple overseas individuals to collectively hold a nearly quarter-stake in a single listed firm.
2. Why This Matters for the Market
Industry experts, including analysts from Wright Research and Angel One, view this as a structural shift for Dalal Street:
- Sticky Capital: Unlike “hot money” from global hedge funds, PROI investors (often with personal or economic ties to India) tend to be patient, long-term holders.
- Reduced Volatility: A broader, more diverse shareholder base can cushion the market during sudden institutional sell-offs.
- Better Price Discovery: Increased participation in Mid-cap and Small-cap stocks—where foreign ownership limits were previously restrictive—will help reflect the true value of these companies.
3. Strategic Integration: The Role of GIFT City
The budget underscored that while direct investment is now easier, platforms like GIFT City (Gujarat International Finance Tec-City) will act as the primary gateway for these flows.
- Streamlined Compliance: GIFT City offers a globally competitive regulatory environment with simplified KYC and reporting norms for overseas residents.
- Tax Efficiency: Investing via GIFT City entities often provides additional tax advantages, particularly for capital gains and interest income.
4. Procedural Safeguards
To ensure market stability, the government has maintained certain checks:
- PIS Registration: Investors must still utilize the existing Portfolio Investment Scheme registration process to track holdings.
- Monitoring: The securities regulator will monitor the 24% aggregate cap to ensure no single group of overseas individuals gains unintended controlling interest without following takeover norms.
Conclusion: Unlocking “Patient” Global Capital
By doubling the individual investment limit to 10%, the 2026 Budget has sent a clear signal that India is open for business at the retail level. While the STT hike on the same day targeted speculative F&O trading, this move specifically encourages stable, delivery-based equity investment. For the millions of Indians living in the UAE, USA, and Europe, the hurdles to participating in India’s “Viksit Bharat” growth story have just been cut in half.
