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Foreign Institutional Investors

January, 2012

FII – Brief Introduction

The Indian economy has successfully proved its mettle time and again in terms of financial stability and economic sustainability as it has resiliently weathered global financial turmoil. Where majority of emerging economies are experiencing huge capital outflows by foreign institutional investors (FIIs), Indian markets have managed to hold their confidence as well as investments during such times. A report titled 'Doing Business in India' by Ernst & Young (E&Y) further supports the fact by highlighting India as the second most preferred destination for foreign investors, next only to China.

Overseas entities are among the important drivers for Indian stock markets. FII flows account for about 45 per cent of the market free-float.

The overview further discusses recent developments, investments, facts & figures and Government initiatives pertaining to foreign investments in India.

FII – Recent Developments

  • According to the data released by Securities and Exchange Board of India (SEBI), FIIs purchased stocks worth Rs 600,000 crore (US$ 113.81 billion) during 2011. FIIs were also seen attracted to the debt market in 2011 wherein they infused Rs 42,067 crore (US$ 7.98 billion). This intense interest in debt markets helped India get a net FII inflow of Rs 39,353 crore (US$ 7.46 billion) for the year (taking both- debt and stocks- into account).
  • Global rating agency Moody's has uplifted Indian bond market by upgrading credit rating of the Indian government's bonds from the speculative to investment grade. The move is expected to attract higher investments from FIIs and help companies raise funds at competitive rates abroad.
  • FIIs invested over US$ 1 billion in Indian debt market in the month of January 2012 itself (till January 5), as per the SEBI data.
  • India's foreign exchange reserves stood at US$ 297 billion as on December 30, 2011.
  • According to the data available with the Bombay Stock Exchange (BSE), FIIs have consolidated their holdings in 11 out of the 30-Sensex firms during the July-September quarter of 2011. They majorly enhanced their holdings in auto stocks such as Mahindra & Mahindra, Maruti Suzuki, Hero MotorCorp and Bajaj Auto.
  • The number of FIIs registered with SEBI stood at 1,749 as of October 2011, while the number of FII sub-accounts was 6,058 during the month. The statistics revealed that there were 1,743 FII accounts and 6, 028 sub-accounts at the end of September 2011.