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Foreign Institutional Investors

December, 2010

Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost 25 per cent of the total inflows in the stock market registered so far in 2010. The net foreign fund investment crossed the US$ 100 billion mark on November 8, 2010, since the liberalization policy was implemented in 1992. As per the data given by SEBI, the total figure stood at US$ 100.9 billion, wherein US$ 4.78 billion were infused in November itself. The humungous increase in investment mirrors the foreign investors’ faith in the Indian markets. FIIs have made investments worth US$ 4.11 billion in equities and poured US$ 667.71 million into the debt market.

Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of registered sub-accounts rose to 5,592 as of November 10, 2010.

According to research reports, India has received more FII funds as compared to its Asian peers. According to Bloomberg, Net FII inflow (till November 23 2010) stood at US$ 28.5 billion, far ahead of South Korea (US$ 16 billion) and Japan (US$ 13 billion). Net FII inflows as a percentage of the market capitalization are also the highest in India at 1.8 per cent in 2010, followed by South Korea at 1.6 per cent.

Quenching its thirst for foreign assets, India Inc announced merger and acquisition (M&A) deals worth a record US$ 55 billion in 2010, including a record number of billion-dollar transactions.

According to a global consultancy firm Ernst & Young (E&Y), India is expected to receive more than US$ 7 billion in private equity (PE) investments in 2010, up from US$ 3.5 billion in 2009. Sectors such as power and transportation, consumer and branded products, infrastructure ancillaries, education and financial services, and healthcare are likely to witness increased PE activity in 2011.

Investment Scenario

Fund-raising activity gained pace by almost 65 per cent in 2010 as compared to 2009. In real terms, 27 funds were able to raise US$ 13 billion as PE as against US$ 8 billion by 22 funds in 2009. There has also been a more than 80 per cent growth in PE and VC investments in India: 2010 witnessed 348 deals worth US$ 8 billion, against 317 deals worth US$ 4.4 billion in 2009, according to VCCedge data.

Indian conglomerate GMR Infrastructure is in advanced talks with private equity firms to raise about 15 billion rupees (US$ 322 million) for its power unit, the Economic Times reported, citing the group's chairman.

The Indian-American IT services company Patni Computer Systems is likely to be acquired by a consortium of Apax Partners and iGate in a deal said to be worth nearly US$ 1 billion. Several media reports suggest that the U.S.-based iGate Corporation and private equity firm Apax Partners are contemplating to buy 63 percent stake in Patni Computers which is valued at around US$ 915 million.