Why foreign investors matter? FIIs are entities established or incorporated outside India permitted to invest in the Indian market. As part of the reform measures in the early 1990s, FIIs were allowed to invest in the Indian market, to create foreign inflows. An FII could be a foreign central bank, a sovereign wealth fund, a mutual fund, an insurance company or a pension fund. They can invest both in the equity and debt market. Investments in the debt market are subject to limits. FIIs can now invest up to $30 billion in government debt and up to $51 billion in corporate debt market. During the global financial crisis of 2008, FIIs sold close to Rs 53,000 crore in Indian equity markets. The trend soon reversed from the beginning of 2009, as the US Federal Reserve started its quantitative easing programme. Cumulatively they have invested close to Rs 4.2 lakh crores in Indian equity markets, between 2009 and now, which is 65 per cent of the value of equity investments held by FIIs today. During 2012-13 alone, FIIs were net buyers to the extent of Rs.1.4 lakh crore, the highest ever inflows seen during a year. Money pumped into the global financial system by central banks was a source of inflows into India. Reforms initiated by the Indian government to boost growth too created a positive market sentiment. FIIs pulling out money from emerging markets soon. A depreciating rupee too did little to keep the FIIs from exiting the Indian market. A weaker rupee implies lower returns (in dollar terms) for overseas investors on their Indian investments. Besides, there has also been other macro concerns such as inflation and high current account deficit, dampening the market sentiment in India. During the month of June, FIIs emerged net sellers (sales exceeding purchases) of equity and debt with net outflows of Rs 11,027 crore and Rs 33,135 crore in the respective markets.
Posted on: Sun, 30 Jun 2013 07:18:15 +0000
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