FII registrations show wider appeal of India story

What do Multi-Style, Multi-Manager Funds Plc of Dublin, Simplicity AB of Sweden and Meinl Bank Aktiengesellschaft of Austria have in common?

Faith in the Indian story.

An increasing number of foreign institutional investors (FIIs) from outside the traditional bases such as the US have started exploring options of investing in India.

And a first step towards this, they are registering themselves as FIIs with the Securities and Exchange Board of India (Sebi).

According to data available, the proportion of new FIIs registering with Sebi from traditional markets such as the US, UK and Europe is on a decline.

From as high as 80 per cent in 2003, the FIIs registering from traditional countries went down to less than 75 per cent in 2004 and further to 50 per cent in the first six months of 2005.

But a new set of foreign institutional investors from Australia, Austria, Canada, Denmark, Ireland, Italy, Sweden and Taiwan are now knocking on the market doors.

Fund managers said the appetite for Indian equities is rising globally and more and more entities from non-traditional countries are either registering themselves with the Indian capital market regulator or investing in India-dedicated funds abroad.

Funds such as Aviva Gestion D'actifs, Government Of The Province Of Alberta, Frank Russell Investment Company Plc, the Asia Debt Recovery Company Ltd, Rolls-Royce Pension Fund, California Public Employees' Retirement System, Darta Investment Funds Plc, Los Angeles City Employees' Retirement System, BDT Invest Funds Plc, Non-Teacher School Employee Retirement System Of Missouri, Ohio Police and Fire Pension Fund and Public School Retirement System Of Missouri are among a large number of funds that have recently registered with Sebi.

The number of new FIIs registering with Sebi have gone up from in 639 in January 2005 to 723 till date.

Explaining the recent trend, the head of equity of a foreign broking firm said, "The interest for Indian equities has spread to non-traditional countries such as continental Europe, Japan and Australia. India is one the fastest growing economies in the world and global investors do not want to miss out on the strong growth potential here."

Andrew Holland, chief administrative officer and executive vice president-research, DSP Merrill Lynch, said, "Since early January, nearly 350 to 400 global investors have attended various conferences of which 50 per cent were first-time investors discovering India."

New funds are aggressively looking at opportunities in various growth sectors. The government recently relaxed foreign direct Investment in areas such as retail, real estate, mining and textiles, which has thrown up new opportunities."

Narayan S A, managing director, Kotak Securities, said, "The large number of FII registrations suggest that there is significant demand for Indian equities from overseas investors. The robust trading system and the tax regime has also enticed foreign investors to directly register with Sebi."

An equity dealer with a domestic firm said with liquidity being provided by domestic institutional investors in the last few months, a lot of these newly registered FIIs have started buying into Indian equities.

FIIs have been a dominant force in Indian equities in the last two years. After pumping in over $8.5 billion last year, in the current financial year, they have already invested more than $3.5 billion.