Foreign institutional investors (FIIs) poured inflows heavily to bet on the India growth story. According to data released by the market regulator Securities and Exchange Board of India (SEBI), FIIs transferred a record US$ 17.46 billion in domestic equities during the calendar year 2009. This FII investment in 2009 proved to be the highest ever inflow in the country in rupee terms in a single year, breaking the previous high of US$ 14.96 billion parked by foreign fund houses in domestic equities in 2007. FIIs infused a net US$ 1.05 billion in debt instruments during the said period.

During the October-December period in 2009-10, FIIs made a net buy of shares worth US$ 5.19 billion, according to data compiled from market regulator, the Securities and Exchange Board of India (SEBI).

In the quarter, December attracted the highest inflow of US$ 2.2 billion, followed by October US$ 1.95 billion and November US$ 1.18 billion. FIIs poured a net US$ 1.26 billion in debt instruments during the said period.

The trend of strong FII inflows to the tune of about US$ 6.3 billion witnessed during April-June quarter gained further during the September quarter of current fiscal with an infusion of US$ 7.2 billion.

The number of FIIs who registered themselves with SEBI this year was higher by 7 per cent over 2008. Data sourced from the SEBI shows that number of registered FIIs stood at 1706 and number of registered sub-accounts rose to 5,331 as of December 31, 2009.

A number of market and equity analysts indicate that a large part of FII inflows have come from long-only funds, signalling that the quality of foreign investment is good.

India has in fact, emerged the most lucrative markets for short and medium-term investments. The US is once again at the top of the list of foreign investors in the Indian stock market, as per data presented in the Lok Sabha by the Finance Ministry. According to the latest data, till mid-November this year, US-based foreign institutional investors (FIIs) had net investments of about US$ 4.46 billion in the Indian markets, as compared with US$ 702.37 million in 2006. They are followed by the US$ 2.57 billion net investments routed through Luxembourg. These two countries are further followed by France, Mauritius and the UK.

FIIs appear to be betting big on the primary market rather than the secondary market, says Mr Anoop Bhaskar, Head of Equities at UTI Mutual Fund. Roughly US$ 9 million-US$ 10 million came in the primary issuance – through qualified institutional placements (QIPs) or preferential allotment or initial public offerings (IPOs).

Private equity firms invested US$ 1.4 billion over 84 deals in India during October-December quarter of 2009, taking the annual investment numbers to US$ 3.82 billion over 232 deals, according to a study by Venture Intelligence, a research service focussed on private equity (PE) and merger and acquisition (M&A) transactions.

Investment Scenario

During 2009, Kohlberg Kravis & Roberts (KKR) PE firm’s investment for increasing its stake in telecom software firm Aricent to 79 per cent for US$ 255 million was the largest deal. Another remarkable deal was Goldman Sachs’ US$ 115 million investment in healthcare firm Max India for a 9.4 per cent stake.

Credit Suisse (Singapore) bought 1.12 per cent stake in Bharati Shipyard for US$ 1.48 million.

Stocks that had more than 10 per cent of FII stake (in BSE-500) in March went from 205 to 232 by end September. Indiabulls RealEstate, IVRCL Infrastructure, Educomp Solutions and United Spirits are a few stocks where FIIs accumulated more shares despite already big holdings.