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Last updated: Jun, 2020

Introduction

Foreign Portfolio Investors/Foreign Institutional Investors (FPI/FII) have been one of the biggest drivers for India’s financial markets, having invested around Rs 12.30 lakh crore (US$ 174.55 billion) in India between FY02-21 (till June 09, 2020). Highly developed primary and secondary markets have attracted FIIs/FPIs to the country. Investment made by FIIs/FPIs in India is regulated by the Securities and Exchange Board of India (SEBI), while the ceiling on such investments is maintained by the Reserve Bank of India (RBI). Type of FIIs investing in India are as below:

  • Hedge Funds
  • Foreign Mutual Funds
  • Sovereign Wealth Funds
  • Pension Funds
  • Trusts
  • Asset Management Companies
  • Endowments, University Funds, etc.

The total market capitalisation (M-cap) of all the companies listed on Bombay Stock Exchange (BSE) rose to a record level of Rs 113.48 lakh crore (US$ 1.60 trillion) in 2019-20 and reached Rs 136.06 lakh crore (US$ 1.93 trillion) in 2020-21 (till June 09, 2020).

Recent Developments/Investments

Some of the recent and significant FII/FPI developments are as below:

  • In the first week of June 2020, FPIs pumped Rs 18,589 crore (US$ 2.77 billion) in the Indian market.
  • In 2019-20, institutional investment in Indian real estate stood at US$ 4.48 billion.
  • In 2019, FPI investment in Indian equities touched a five-year high of Rs 101,122 crore (US$ 14.47 billion).
  • Domestic institutional investors (DIIs) and foreign portfolio investors (FPIs) together invested Rs 1.43 lakh crore (around US$ 20 billion) in 2019.
  • Morgan Stanley set its Sensex target to 40,000 by June 2020.
  • Investment by FPIs in Indian capital markets reached a net Rs 10,312 crore (US$ 1.48 billion) by June 2019. FPIs invested Rs 1,937.54 crore (US$ 277.23 million) into debt segment during August 1-9,2019.
  • In 2018-19, India ranked seventh with a M-cap of US$ 2.1 trillion.
  • In September 2018, Embassy Office Parks filed the papers for India’s first Real Estate Investment Trusts (REIT). In September 2019, Embassy Office Parks announced planned to expand its portfolio in Hyderabad and Chennai and list nation’s second REIT in 2020-21.

Government/Regulatory Initiatives

  • In May 2019, SEBI proposed reducing the overall time taken for rights issue from 55-58 days to around 31 days. This would make the application and allotment process more efficient.
  • In September 2018, SEBI reduced the time to list shares on stock exchange after initial public offerings to three days from the existing six days.
  • A report filed by a panel appointed by the Securities and Exchange Board of India (SEBI) on December 04, 2018 has proposed direct overseas listing of Indian companies and other regulatory changes.
  • In September 2018, SEBI relaxed the know-your-client (KYC) requirement for FPIs.
  • In September 2018, SEBI allowed Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) to start commodity derivate segments.

Road Ahead

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 have been strong and is expected to improve going forward.

Mr Mark Machin, Chief Executive Officer, Canada Pension Plan Investment Board (CPPIB), has expressed confidence in the Indian equity market and stated that the country is one of the best investment destinations based on its demographic growth, increased productivity, and long-term economic growth potential.

"The FII participation has been very consistent as far as India is concerned and we see the trend continuing. We have been overweight India in the context of Asia and emerging markets since November 2013 and that stance very much continues," said Mr Bharat Iyer, MD, Global Research, JP Morgan India.

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123