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Foreign Institutional Investors

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Foreign Institutional Investors

January, 2013

FII - Brief Introduction

Despite a gloomy global financial scenario, foreign institutional investors (FIIs) are betting big on Indian capital markets, wherein they pumped in about US$ 25 billion in 2012. As a result, the Sensex got a boost of 26 per cent while Nifty soared 27 per cent (showing better performance not only than the emerging markets, but also better than the developed countries).

Over the past 15 years, the Indian markets have received almost a fifth of all FII equity flows to emerging markets.

Market experts believe that the recent reform initiatives undertaken by the Government, lack of investment options in other countries and overall a positive investor sentiment are certain factors that have made India attract the highest amount of foreign inflows as against its Asian peers.

Also, 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.

FII - Key Statistics

  • Investments into Indian shares through participatory notes (P-Notes) were recorded at US$ 32.4 billion in November 2012, according to the latest data released by the Securities and Exchange Board of India (SEBI)
    P-Notes, allow entities like overseas High Net-worth Individuals (HNIs), hedge funds and other foreign institutions, to invest in Indian markets through registered FIIs , while saving on time and costs associated with direct registrations
  • Overseas investors infused a hefty sum of Rs 4, 500 crore (US$ 834.54 million) in the first week of January 2013; wherein during January 1- 4, 2013, FIIs were gross buyers of shares worth Rs 8, 350 crore (US$ 1.55 billion), while they sold equities amounting to Rs 3, 830 crore (US$ 710.25 million)
  • As on January 4, the number of registered FIIs in India stood at 1, 760 and total number of sub-accounts were 6, 357
  • Another statement issued by the Reserve Bank of India (RBI) revealed that foreign exchange reserves stood at US$ 294.99 billion for the week ended January 4, 2013 wherein the value of gold reserves was recorded at US$ 27.21 billion and that of foreign currency assets (FCAs) was at US$ 261.06 billion
  • The value of special drawing rights (SDRs) was US$ 4.40 billion and the country's reserve position with the IMF was at US$ 2.30 billion

FII- Key Investments and Developments

  • Since the opening up of Indian markets in 1992, FIIs have made a cumulative net investment of US$ 125 billion in shares and US$ 32 billion in the debt segment. Moreover, their aggregate holding in the country's top 75 companies rose to a six-year high level of 21.6 per cent in the July-September 2012 quarter, according to investment banking major Morgan Stanley
  • Recent shareholding data released in December 2012 by 20 companies (out of the 30 that form the Sensex), indicates that private sector leaders such as -HDFC, Tata Power, Tata Motors, HDFC Bank and Infosys - were the biggest gainers of FII inflow during the period
    In HDFC, the FII holding went up by almost 7 percentage points from 66.2 per cent in December 2011 to 73.2 per cent in December 2012 while the State Bank of India (SBI) witnessed a hike in its FII holding by 1.8 percentage points