Indian markets start attracting FIIs again


Indian markets start attracting FIIs again
Bangalore: The Foreign Institutional Investors (FIIs) are back with their investments in the Indian equity markets, after a slump due to the economic slowdown. During the quarter ended June, FIIs increased their investment in almost 40 firms out of the 50 that constitute the Nifty index. According to Mint, investors bought into the India growth story and expectations of economic reforms after the United Progressive Alliance (UPA) won a decisive victory in the general election. The stock market reacted positively to the mandate, as the Bombay Stock Exchange's (BSE) Sensex gained 49.2 percent in the three months ended June, the best quarterly gain in 17 years. As liquidity returned slowly to the global financial system and risk appetite resurfaced on hopes of an early turnaround in major economies, investors started buying. "It's a reflection of political stability and reforms moving along," said Sanjay Sachdev, Country Manager and Regional Fund Manager (South-East Asia) at Tokyo-based Shinsei Bank. "The global liquidity flow has also improved and that has a positive impact," added Sachdev. In the Indian stock market, FIIs are the largest category of investors with foreign investors buying stocks worth $6.42 billion in April-June. "The rest of the world is struggling," said Abhay Aima, Head of Equities, Private Banking and Third-Party Products, at HDFC Bank. "In India, people are saying worst case is six percent economic growth. That attracts capital," Aima adds. The Indian Gross domestic product (GDP) grew at 5.8 percent in the January-March quarter, much lower than 8.6 percent in the year-ago period, but higher than market expectations of five percent. GDP grew 6.7 percent in the last fiscal. The maximum rise in FII holding was in real estate developer Unitech - from 8.24 percent at the end of March to 22.79 percent on June 30. The increase in Unitech is on account of the company selling shares to qualified institutional buyers to partly retire its short-term debt. FIIs, considered the backbone of Indian equity markets, entered the country in 1993. Since then, they have invested around $55.32 billion. In 2007, they pumped in $17.78 billion, the largest ever inflow of foreign portfolio investment in India, but the financial crisis of 2008 saw them withdraw $12.18 billion. But, since January this year they have invested a total of $6.58 billion.