Foreign Portfolio Investors/Foreign Institutional Investors (FPIs/FIIs) have been a major driver of India's financial markets, investing Rs. 50,089 crore (US$ 7.06 billion) in the calendar year 2021. The country has attracted FIIs/FPIs due to its well-developed primary and secondary markets. The Securities and Exchange Board of India (SEBI) regulates foreign institutional investors' (FIIs/FPIs) investments in India, while the Reserve Bank of India sets a limit on such investments (RBI).
Type of FIIs investing in India are as below:
The total market capitalisation (M-cap) of all companies listed on the Bombay Stock Exchange (BSE) rose to a record level of Rs. 264.06 trillion (US$ 3.42 trillion) in 2021-22, from Rs. 204.31 trillion (US$ 2.76 trillion) in 2020-21.
Some of the recent and significant FII/FPI developments are as follows:
Some of the recent government initiatives and regulations in the FII space are as follows:
India has the potential to attract US$ 160 billion of FDI by 2025 according to Commerce & Industry Minister, Mr. Piyush Goyal on November 16th 2021. With 90 unicorns, India's startup ecosystem raised US$ 42 billion in 2021, making it the third-largest unicorn hub in the world. This trend is anticipated to continue. Softbank was India's largest foreign investor, funding nearly 10% of all unicorns.
By 2024, India is expected to exceed the UK and the Middle East as the global fifth-largest stock market. The growth is expected to be driven by the pipeline for future public listings. As of Sept. 2021, start-ups in India have raised US$ 10 billion through IPOs, significant growth over the last three years. This growth is further expected to go north and drive India’s aggregate stock market value to >US$ 5 trillion by 2024 from the current US$ 3.5 trillion.
India is being viewed as a potential opportunity by investors with the economy having the capacity to grow tremendously. Buoyed by strong support from the Government, FII investment has been strong and is expected to improve going forward. "The midcap and smallcap space are providing investors with an attractive opportunity for long term investment at current valuations. This could be an apt time for investors to build their midcap and smallcap portfolio while sticking to their asset allocation," said Mr. Gaurav Garg, Head of Research at CapitalVia Global Research Limited.
BofA Securities stated that “FII flows for industrials and materials sectors could turn positive especially given their underweight positioning and improving traction for Make in India and government’s CAPEX push.”
“India equities represent one of the fastest-growing sectors globally and the country is looked up at the top of the list with China for investment returns over the next 12-24 months (2021-22),” said Mr. Nuno Fernandes from GW&K Investment Management LLC in New York.