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Foreign Institutional Investors

October, 2011

FII – Brief Introduction

India is witnessing intense activities from foreign institutional investors (FIIs), on account of the country's positive investment environment and high growth potential. FIIs, convinced about India's economic progress, are increasingly looking forward for investment options in India, be it in the form of private equity (PE), mergers & acquisitions (M&As) or investment in equities and debt instruments.

Quenching its thirst for foreign assets, India Inc announced 177 M&A deals worth US$ 26.8 billion in the first nine months of 2011. For the quarter July-September 2011, inbound deals worth US$ 7.32 billion were registered as against the deals worth US$ 2.65 billion in the previous quarter; total value being largely accounted for by two mega deals – British Petroleum's (BP) US$ 7.2 billion acquisition of stake in Reliance Industries' oil and gas properties and Vodafone Group's purchase of partner Essar's 33 per cent stake in Vodafone Essar Limited for US$ 5.46 billion.

The FII scenario has witnessed significant developments and investments in 2011, some of them being discussed hereafter.

FII – Recent Developments

  • FIIs' net investment for the month of September 2011 stood at US$ 6.97 million and their injections from January–August 2011 stood at over US$ 2 billion.
  • According to latest data released by Securities and Exchange Board of India (SEBI), 21 institutions registered as FIIs with the market regulator in 2011-12 (till September), enhancing the presence of registered FIIs to 1,743. Moreover, the number of registered sub-accounts has increased by 342, taking the count to 6,028 in September 2011. Both figures are all-time highs.
  • According to the data available at Bombay Stock Exchange (BSE), FIIs have increased their stake in ten out of 100 companies in quarter ended September 2011.
  • FIIs' holdings through participatory notes or P-notes increased by 1.4 per cent in equities and debt instruments, including the derivatives, in August 2011. FII P-note position was noted at 15.4 per cent in August, as against 14 per cent in July 2011, according to the SEBI data.
  • India's foreign exchange reserves marked a new high at US$ 319 billion as on July 29, 2011, as per the data by the Reserve Bank of India (RBI). Growth in foreign currency assets and appreciation in gold reserves contributed to the reserves' increment. While the gold reserves recorded an all-time high of US$ 25,349 million, foreign currency assets were valued at US$ 286 billion on that date.