Foreign institutional investors (FIIs) continued their buying spree, with their net inflow into Indian equities crossing the $18-billion mark in 2012 so far.
Foreign investors have made a net inflow of $18.15 billion (about Rs 94,337 crore) so far in the current calendar year — the second highest in a single calendar year since their entry into Indian capital markets in November 1992.
The overseas investors had made net investments of $29.3 billion (about Rs 133,266 crore) in the entire calendar year 2010, according to data available on the Securities and Exchange Board of India (Sebi) website. Net outflow by FIIs was $358 million in calendar year 2011.
Indian equities have attracted the highest foreign institutional flows than any other Asian market so far this year. Foreign funds have poured close to $12.36 billion in South Korea, followed by Japan ($4.26 billion), Indonesia ($2.08 billion), the Philippines ($1.94 billion) and Taiwan ($1.69 billion), according to Bloomberg data.
The recent reforms initiatives taken by the Indian government to boost economic growth and investor sentiment have seen renewed interest by overseas investors. Some big ticket transactions in companies such as Tech Mahindra, Cairn India and HDFC in the secondary market via bulk deals have also seen more FIIs inflow into equities.
As much as $17.7 billion has come into the secondary market, while just $451 million came into the primarily market, mainly initial public offerings (IPOs), follow-on-offerings (FPOs), rights issues, qualified institutional placements (QIPs) and other equity-related instruments, according to the Sebi data.
Under the new finance minister, P Chidambaram, the government has unleashed a barrage of reforms since September 2012 to rebuild investors’ confidence and accelerate growth.
However, market experts believe that the pace of the flows will slow from hereon, as many investors have cut their underweight on India.
“The overseas investors would now look for evidence on implementation of key policy measures announced and the change on the ground, before the next rush of inflow happens” said Toral Munshi, head of India equity research, Credit Suisse Wealth Management. “India’s share of cumulative FII flows over the past 15 years has been about 20 per cent among the emerging markets and 42 per cent in BRIC, much in excess of its MSCI weight,” added Munshi.
