This is subject to the condition that the investment by a mutual fund does not exceed 10 per cent of the net assets and subject to a minimum of $ 20 million and a maximum of $ 50 million.

The minimum investment norm of $ 20 million would mean that at current rates a fund cannot invest less than Rs 86 crore. Thus funds with less than Rs 860 crore assets would not be in a position to invest in the ADRs and GDRs. While this will ensure that small funds do not take exposure to the ADRs/GDRs, it will keep even large funds away from such investments. ``A minimum exposure of $ 20 million is a difficult proposition for even a large fund,'' says a fund manager.

While ICICI has lined up an ADR issue of $ 315 million to be listed on theNew York Stock Exchange, the ADRs of Infosys Technologies are traded on the Nasdaq.

However, the Infosys ADRs are trading at a substantial premium of nearly 53 per cent to the shares in the domestic market. There are as many as 64 GDRs of Indian companies, most of which trade at a premium to their shares in the domestic market.

The entire exercise of the market regulators and the government appears to be to test the waters before permitting mutual funds to invest in papers other than those issued by Indian companies, says another fund manager.

The overall ceiling for all mutual funds in India has been prescribed at $ 500 million. The Reserve Bank of India in its October 1997 credit policy has announced that mutual funds would be permitted to invest in overseas markets. Sebi had constituted a working group to frame the guidelines for domestic funds to invest in overseas markets. The group recommended that initially mutual funds be allowed to invest only in ADRs/GDRs issued by Indiancompanies.

Following approval from the RBI and the government, Sebi has decided to permit overseas investments limited to Indian securities.