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Foreign Institutional Investors

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Foreign Institutional Investors

April, 2014


India has attracted the highest foreign investment among emerging economies in 2014. At US$ 4.18 billion, the country's foreign institutional investor (FII) inflows are higher than that of other emerging economies such as Taiwan (US$ 3.6 billion), Indonesia (US$ 2.4 billion), Brazil (US$ 1.2 billion) and South Africa (US$ 0.7 billion).Further, foreign investors invested about Rs 371,342 crore (US$ 61.69 billion) in Indian stocks in the four years ended December 2013. These figures highlight the impact of foreign investment in India’s growth as an economic power.

India’s economic growth is, however, a recent development. Of the many factors for its progress, foreign investment is among the primary reasons. When the Government of India decided to allow 100 per cent foreign direct investment (FDI) in several sectors, it gave rise to a market full of possibilities. Empowered by the Centre’s initiatives and the relaxing of investment rules, sectors such as automobiles, construction and real estate, among others, have blossomed.

FII – Key Statistics

  • In 2013, foreign investors infused a net Rs 1,130 billion (US$ 18.76 billion) in equities.
  • Total number of FIIs registered in India was 1,710 in FY 14.
  • An aggregate net investment of Rs 7.08 trillion (US$ 117.56 billion) have been made in shares by FIIs, since they entered the Indian market in 1992.

FII – Key Investments and Developments

FIIs invested around Rs 79,709 crore (US$ 13.23 billion) in the country’s equity market in FY 14, according to data released by the Securities and Exchange Board of India (SEBI). During the year, foreign investors invested majorly in domestic equities markets as Indian equity markets gave some of the best returns among emerging countries, as per market analysts.

FIIs bought debt securities worth Rs 8,155 crore (US$ 1.35 billion) and sold bonds to the tune of Rs 4,609 crore (US$ 765.69 million) in the period January 1–10, 2014, which resulted in a net inflow of Rs 3,546 crore (US$ 589.10 million), according to data provided by SEBI. Their total investment in debt and equity in the period was about Rs 4,091 crore (US$ 679.49 million).

The Reserve Bank of India’s (RBI) efforts to attract foreign exchange were rewarded at the end of 2013, with remittances from non-resident Indians (NRIs) reaching US $13.71 billion in November. Under foreign currency non-resident – banks [FCNR(B)] category, the deposits touched US$ 38.62 billion at end of November, 2013 up from US$ 24.70 billion in October, 2013, as per RBI data.

The RBI has allowed Hinduja Foundries to increase its foreign investment limit up to 60 per cent of paid-up capital. This increase in investment limit is under the Portfolio Investment Scheme (PIS). Hinduja Foundries is a group company of multi-billion dollar Hinduja Group which is headquartered in London.

Total FII investment in equity and debt in India crossed the US $10 billion mark on April 2, 2014. FIIs invested another US$ 100 million in Indian shares the same day, taking the FII purchases in the year (up to April 2, 2014) to US$ 4.18 billion. In the debt market, FII investments stood at US$ 6.13 billion.

Britain's Tesco has sealed an agreement with Trent Ltd – a retail unit of the Tata Group – that will see it invest US$ 140 million and become the first foreign supermarket to foray into India’s US$ 500 billion retail sector. The deal is a 50:50 joint venture (JV) with Trent Hypermarket Ltd (THL) – the operator of the Star Bazaar retail business.