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Foreign Institutional Investors (FII) in India

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Foreign Institutional Investors (FII) in India

April, 2013

FII - Brief Introduction

Foreign investors are highly confident about India's growth potential, said a high-end official from global ratings agency Fitch, adding that more of the investments will start coming-in post general elections in 2014.

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. Over the past 15 years, the Indian markets have received almost a fifth of all FII equity flows to emerging markets while the country attracted almost half of all FII equity flows to Asia ex-Japan, China and Malaysia, in 2012.

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.

FII - Key Statistics

  • FIIs have infused US$ 26 billion in the Indian stock market during the fiscal ended March 31, 2013, according to latest data available with the market regulator Securities and Exchange Board of India (SEBI). The amount is the highest ever since overseas entities started investing in the country
  • 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
  • Another statement issued by the Reserve Bank of India (RBI) revealed that foreign exchange reserves increased by US$ 1.05 billion and stood at US$ 293.37 billion for the week ended March 22, 2013. Foreign currency assets (FCAs), a major component of the forex reserves, stood at US$ 260.41 billion while the gold reserves amounted to US$ 26.292 billion

FII- Key Investments and Developments

  • US-based philanthropic investment firm Omidyar Network is contemplating to invest US$ 100-200 million in for-profit and not-for-profit companies in India. The firm, founded by eBay founder Pierre Omidyar and his wife Pam, has already invested US$ 113 million across 35 companies in the country since 2010. The investments by Omidyar are focused around consumer internet and mobile, entrepreneurship, financial inclusion, government transparency and property rights. The firm identifies investment opportunities in firms where social impact is the unifying criterion
  • India is increasingly becoming a viable investment destination for international majors, particularly the Swedish firms. More than half of the Swedish investors are wanting to escalate their investments in India during FY 2014, said a survey carried out by the Swedish Chamber of Commerce.

    Swedish retailers such as IKEA and H&M are planning to establish stores in India in 2013. Major Swedish companies in India include transport major Volvo, bio-pharma company Astra Zeneca, telecom firm Ericsson and industrial equipment makers Atlas Copco, Sandvik and SKF.

    The number of Swedish companies in India has increased 14.5 per cent to 158 in 2012 as against 153 of them in the previous year, and the number is likely to go up in 2013 as well
  • US venture capitalist Canaan Partners has planned to invest US$100 million in India through 2013-17. The investor will earmark the amount from its US$ 600 million Canaan IX fund, which was raised in 2012.

    Canaan manages assets worth US$ 3.5 billion globally, and has invested US$ 150 million in India till date. The firm is looking to infuse the funds in technology companies focused on consumer internet, enterprise, mobile, analytics and applications around cloud and big data