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Foreign Institutional Investors (FII) in India

July, 2013

FII – Brief Introduction

Despite global gloom, foreign institutional investors (FII) have retained their faith in Indian economy; thanks to its robust financial structure and favourable business ecosystem. India Inc has witnessed a surge in FII inflows in 2013 wherein foreign investors deployed US$ 11.3 billion the first four months of 2013, an increase of 31 per cent year-on-year (y-o-y). Industry analysts believe that the trend would sustain for the rest of the year as India seems to be benefitting from the reallocation of global flows.

Foreign funds drive Indian capital markets in a big way. Sensex had gained 26 per cent on FIIs inflows of US$ 24 billion in 2012.

FII – Key Statistics

  • Foreign investors have immense faith in Indian financial markets. The fact is substantiated through statistics which show that they pumped massive US$ 10 billion in Indian markets in January-March 2013 quarter. Moreover, FII ownership in top 500 companies is highest at 21.2 per cent for the reported quarter. It increased by 1.28 per cent in the January-March quarter alone and 2.87 per cent in 2012-13.
  • Moreover, value of FII inflows stood at US$ 25.8 billion for the financial year ending March 2013, the second best ever. Data compiled by Citi Research and the Centre for Monitoring Indian Economy indicated that the value of FII portfolio stood at $236.2 billion.
  • The number of registered FIIs in India stood at 1,757 in FY 2012-13 while the number of FII sub-accounts rose to 6,335, from 6,322 at the end of 2011-12.

FII- Key Investments and Developments

  • Germany-based Software Company Graebert is planning to enter computer aided design (CAD) market in India. The company has formulated a wholly-owned subsidiary (WoS), Graebert India Software (Noida), for the marketing of its ‘ARES’ software.

    The CAD software market in India is anticipated to grow at a compounded annual growth rate (CAGR) of 26 per cent till 2014, according to a report from research firm Technavio. Graebert intends to tap this potential and is keen to form alliances with Indian software companies and channel partners to introduce cost-effective products for CAD users in India.
  • Japanese electronics giant Panasonic Corporation has decided to invest Rs 1, 500 crore (US$ 251.15 million) over 2013-16 in India to revitalise its operations. The company is keen on signing new partnership agreements with Indian majors like Ambanis and Tatas in order to hike its turnover by 2015 and eventually increase the share of its enterprise business in the country.

    Having tasted success in consumer goods segment, the company now lays a renewed focus on the business to business (B2B) segment. Going according to its global business expansion plan, Panasonic aims to double the contribution of its B2B segment in the overall revenue by 2015 and introduce new product ranges in the category. New products would majorly include energy solutions, security and surveillance systems.
  • Finland-based energy company Fortum has acquired a 5 megawatt (MW)-photovoltaic solar power plant in Rajasthan. The facility, which was constructed as part of the Jawaharlal Nehru National Solar Mission, has nominal peak capacity of 5.4 MW and its annual production is about 9 gigawatt hours.

    Solar power is a gaining a lot of attention as an industry segment in India and is expected to account for a major part of power generation in the future. ‘Fast technological development is boosting competitiveness and on best markets, wholesale parity can be expected already within a few years’ time,’ said Matti Kaarnakari, Managing Director, Fortum India Pvt Ltd.
  • World’s biggest packaging company Tetra Pak has increased its investment in India by building its largest plant outside home market Sweden, with an outlay of Rs 700 crore (US$ 117.20 million). The company, which caters to international majors like Nestle and Danone, has witnessed a very rapid growth in India of over 20 per cent in the last 3-5 years. Tetra Pak looks at Indian dairy market, the largest in the world, as a big opportunity.

    The new facility at Chakan near Pune has a manufacturing capacity of over 8.5 billion packages per annum.
  • Italian manufacturers of high-end and super-expensive shoes are considering India as a replacement for their production base in Europe. The luxury brands are looking for local partners to drive their growth in the Indian markets. Some of these are leading brands such as Baldinini, LORIBLU, Giovanni Fabiani, NeroGiardini, Janet & Janet, FABI and Fratesi.

    Overall, the Indian footwear market is valued at about Rs 19, 900 crore (US$ 3.33 billion), growing by 8-10 per cent per annum. The market includes casual, formal, semi-formal and sports shoes, along with sandals, for men and women. The men’s segment accounts for 59 per cent of the market. The overall share of organised retail is 20 per cent and is projected to reach 25-30 per cent by 2015.