Study sees FII inflows at $50 bn in 2006, exposure rising 25%

Foreign institutional investor (FII) inflows into the country's capital markets are expected to touch $50 billion in 2006, the cumulative investment having touched $40 billion by October 2005, according to a paper released by the Associated Chambers of Commerce and Industry of India (Assocham).

Calling the corporate stocks undervalued, the chamber's paper 'FII Inflows in Indian Stocks' says positive corrections of the government policies towards stock markets will play a significant role in further increasing FIIs' exposure to Indian stocks by 25 per cent in 2006.

"The listed companies in the private and the public sectors, whose corporate governance will show improvements consistently, will attract FII investments in relevant sectors of the economy," said Assocham President Anil K Agarwal.

The paper lists strong economic fundamentals, growing investor confidence, good macroeconomic fundamentals, and the growing industrial and service sectors as the reasons behind the increase of cumulative FII inflows from $4 million in 1992 to $40 billion this year.

The number of FIIs has also increased from none in 1992-93 to 528 in 2000-01 to 803 in 2005-06. In 2005 alone, 145 new FIIs registered themselves with the Securities and Exchange Board of India, taking the total registered FIIs to 803 (as on October 31, 2005) from 685 in 2004-05.

Apart from Japanese and European funds aiming to cash in on the rising equity markets in India, there was increased registration by non-traditional countries like Denmark, Italy, Belgium, Canada and Sweden.

The world's biggest pension fund, California Public Employees Retirement System (Calpers), with a base of $165 billion, has also recently decided to invest $100 million in India, it mentions. Confidence booster

Positive corrections of the government policies towards stock markets will play a significant role in further increasing FIIs' exposure to Indian stocks by 25 per cent in 2006

The number of FIIs has also increased from none in 1992-93 to 528 in 2000-01 to 803 this year

Strong economic fundamentals, growing investor confidence, good macroeconomic fundamentals, and growing industrial and service sectors are the reasons behind the increase of cumulative FII inflows from $4 million in 1992 to $40 billion this year