In a sign of growing global interest in India's long-term growth story, foreign institutional investors (FIIs) invested Rs 1,46,438 crore in 2010-11 in the Indian securities market, more than double the amount (Rs 66,179 crore) invested in 2007-08.The investment during 2010-11 is also the highest net investment by FIIs so far, according to the 2010-11 annual report released by the Securities and Exchange Board of India (SEBI).
Net investment of by FIIs grew by 3% in 2010-11 (see table).
The surge in FII investment indicates the country's long-term growth potential, said Alex Mathew, head of research, Geojit BNP Paribas Financial Services. Only a few economies in the world are expected to grow at around 9% in the medium-term, he added.
At a time when developed economies are struggling for growth due to the current slowdown, the Planning Commission has fixed an average growth target of 9% for the 12th Five-Year Plan (2012-17).
A major part of the investment was directed towards equities, which saw Rs 1,10,121 crore investment by FIIs in 2010-11 against Rs 1,10,220 crore in 2009-10. Around Rs 36,317 crore was pumped into debt during 2010-11 compared to Rs 32,438 crore during 2009-10. The gross purchases of debt and equity by FIIs increased by 17.3% to Rs 9,92,599 crore in 2010-11 from Rs 8,46,438 crore in 2009-10.
However, the outlook for the current fiscal year is not too rosy as a slowdown in the world economy has shaken the confidence of global investors, who are likely to adopt a wait-and-watch policy. Much of the investment for the year has been made and there will not be much investment coming during the rest of the year, said SP Tulsian, an independent analyst.
During the slowdown in 2008-09, net investment by FIIs was negative (-Rs 45811 crore) as they took more money out of India.
Till July 2011, net investment by FIIs stood at Rs 9,326 crore.
India will continue to attract FIIs as India's long-term story remained intact, said Mathew.