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1,000 and counting; FIIs make a beeline for India

According to SEBI data, the total FII investment in India has surpassed $50 billion, reports Saumya Roy.

india Updated: Dec 29, 2006 02:52 IST
Saumya Roy

The 1,000th foreign institutional investor (FII) has entered the Indian stock market. Reaching the magic number took 13 years - the government had opened the doors to overseas portfolio investors in 1993.

According to data available with the Securities and Exchange Board of India (SEBI), the FIIs have so far made a net investment in equities of $49.32 billion (Rs 2,13,031 crore). If their investment in debt is also taken into account, the net FII investment in India has surpassed $50 billion. They have bought shares worth Rs 13,27,251 crore and sold shares worth Rs 11,14,219 crore. This year, the net FII investment in equities has been $8.22 billion.

The reason for the global investment community's love for Indian stocks: a third consecutive year of 8 per cent growth in GDP and strong corporate performances.

On Wednesday, SEBI revealed its web site could not be updated in December and 1,030 FIIs had now been registered. Till November-end, 993 FIIs were registered.

"While this is a landmark, it is a continuation of what has been happening in the market for the past few years. The steady stream of inflow will last as long as the economy is robust," says Bandi Ram Prasad, a senior consultant with Dunn & Bradstreet, a business and credit-information firm, and a former chief economist at the Bombay Stock Exchange.

Early investors talk of how investment in the 1990s was restricted to a few large-cap companies. Then India's booming technology sector started drawing global interest. The FIIs started chasing India's growth story in real earnest from 2003, when the corporate sector registered a net profit growth of over 50 per cent after debt restructuring by many manufacturing companies.

"I would say the turning point was when CALPERS (California Public Employees Retirement System) came in, after the 2004 elections," said Andrew Holland, head of the strategic risk group, Merrill Lynch.

While India still does not have an investment-grade rating, safer investors -- like pension funds -- are now entering the markets too. "India has low weightage and is not investment grade yet. So while these flows are robust, there is still room for growth," said Harendra Kumar, head of research, ICICI Direct.

The investments are spread out across various sectors and companies. Although the United States and Europe dominate as originating countries of FIIs, an increasing number of investors from Japan and West Asia have also started setting up shop in India.

While the foreign institutional investor investment is aggregated at $50 billion, the market value of the investment is much higher than $100 billion. So the foreign players have not only received huge dividends from Indian companies, the value of their investment in India has also grown substantially. They now hold over 40 per cent stake in 12 firms and between 25 per cent and 40 per cent in 45 firms. In about 250 Indian corporations, their holdings vary between 10 and 25 per cent.

SEBI has not disclosed the identity of the 1,000th investor. It could be either Anima SGRPA of Italy or Acumen Capital Management of the US, said a domestic broker.

First Published: Dec 29, 2006 02:52 IST