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Foreign Institutional Investors

July, 2011

Foreign Institutional Investor (FII) India - Brief Overview

What is FII

Foreign institutional investment signifies investments made by individual investors or companies in foreign lands. In India, entities and funds who are eligible to get registered as FII comprise Pension Funds, Mutual Funds, Insurance Companies, Investment Trusts, Banks, University Funds, Endowments, Foundations, and Charitable Trusts / Charitable Societies. Apart from these,entities proposing to invest on behalf of broad based funds are also eligible to be registered as FIIs. These comprise Asset Management Companies, Institutional Portfolio Managers, Trustees, and Power of Attorney Holders.

Rising FII Activity - India has been witnessing a surge in FII activity since the opening of its capital markets. Owing to its high growth potential, India has become a favourite destination for FII activity. FIIs, convinced of India’s economic progress ad strong corporate earnings, are continuously investing in the country.

At the macro level, India is still among the best macro stories in the world, according to JagannadhamThunuguntla, SMC Global Securities Ltd Strategist and Head of Research

FII Activity – Recent Developments

  • Fast GDP growth has made India a preferred destination for foreign investors post the 2008 financial crisis. In 2010 itself, India attracted nearly US$ 30 billion of net foreign inflows, which was just under 50 per cent of all inflows into emerging Asian markets, excluding China
  • FII Trading Activity - Rising Investments in equity and debt markets –Foreign investors have invested Rs 6,460 crore (US$1.45 billion) in Indian stock markets in just five trading sessions of July 2011 and the trend is expected to continue, according to analysts
  • In the first six months of 2011, overseas investors infused around Rs 17,000 crore (US$3.82 billion) into the Indian market, including stocks and bonds. In the same period, FIIs made investments of Rs 9,948 crore (US$2.23 billion) in the debt market, with investments in stocks being Rs 2,670 crore (US$ 599.79 million)
  • FIIs bought equities and debt securities worth Rs 26,004 crore (US$ 5.84 billion) till July 10, 2011, according to the data available with market regulator Securities and Exchange Board of India (SEBI).
  • The number of FIIs registered with SEBI increased from 1,718 as of December 31, 2010, to 1,730 as of July, 2011. Moreover, the number of registered sub-accounts has risen from 5,503 in December 31, 2010 to 5,898 currently

FII Holdings/FII Trends

International investors increased their stakes in most companies last quarter. FII’s holding was higher in 26 companies while it remained the same in 50 per cent of the 108 companies for which shareholding details were available with stock exchanges as on July 13, 2011.

FII-supported outperformers include Talwalkars Better Value Fitness (TBVF), Lupin, Petronet LNG, GlenmarkPharma, ING Vysya Bank, MRPL and Castrol India.