Indian equities have attracted maximum investments by Foreign Institutional Investors (FIIs) as compared toany other Asian market on the back of policy reforms undertaken by the Government of India to promote economic growth.
FIIs remain substantially bullish on Indian markets and have invested over US$ 13 billion into Indian stocks till September 2012.. A sectoral break-up reveals that finance sector accounted for 26 per cent of the inflows and if banks are included, the pie grows to 32 per cent. Fast moving consumer goods (FMCG) and information technology (IT) attracted 17 per cent and 15 per cent of the inflows, respectively.
India is considered to be the third most favoured destination for investment after China and the US for major global companies, according to UNCTAD's World Investment Report 2012. The report anticipates that foreign investments in India could increase by over 20 per cent in 2012-13.
The Government has been taking various initiatives to boost economic growth and hence attract foreign investments in a big way. Recent reforms like the Cabinet approval for 49 per cent foreign direct investment (FDI) in insurance and FDI in pension sector have given a new direction to investor sentiment.
Meanwhile, SEBI has relaxed debt allocation norms for FIIs wherein they will be allowed to carry forward 50 per cent of their debt holdings to the next calendar year. The reform would be implemented with effect from January 1, 2014. SEBI has also reduced the utilisation period for Government securities (G-secs) and corporate debt limits to 30 days (from 45 days) and 60 days (from 90 days), respectively.
Within the FII debt limit, the unutilised limit in respect of corporate debt infra long term bonds category may be availed by the FIIs/Sub Accounts without obtaining prior SEBI approval till the overall FII investments reaches 90 per cent of the limit.
Furthermore, in a bid to simplify investment process for overseas investors and strengthen their faith in the Indian markets, SEBI has proposed to formulate uniform guidelines for all classes of foreign investors such as FIIs, non-resident Indians (NRIs), Foreign Venture Capital Investors (FVCIs) and QFIs. The regulator would prepare draft guidelines for the same.
The Center for Monitoring Indian Economy (CMIE) projects that FII inflows would strengthen in the second half of FY13 at US$ 11.2 billion as India is looked upon as a viable long-term investment destination on the global canvas. Major FIIs like JP Morgan, Morgan Stanley and Deutsche Bank are believed to drive the positive wave of foreign investments.
Exchange Rate Used: INR 1 = US$ 0.01884 as on October 10, 2012
References: Media Reports, Press Releases.