Palak Shah / Mumbai October 08, 2007
Foreign institutional investors (FIIs) are rushing in to get
registered in India. Those awaiting the registration are in no
mood to while away the time as they buy stocks through the
participatory note (PN) route on the back of better returns from
the appreciating rupee.
In the last one month, over 30 new FIIs registered with the
Securities and Exchange Board of India (Sebi), taking the total
number of FIIs in India to 1,108. Some of the new entrants
include ADI Alternative Investments (one of France’s biggest fund
houses managing 7 billion euros worth assets), APAX Partners
Europe Managers (a UK-based firm managing $20 billion assets
worldwide) and BAADR Service Bank of Germany.
After the Fed rate cut on September 18, FIIs have pumped in about
$5 billion in the secondary market alone. It is believed that
US-based hedge funds are the major contributors in the fresh
inflows, according to senior executives of foreign brokerages.
“There seems to be no sign of the FII inflow drying up in the
near future. Even some of the mid-sized fund managers, who have
never tapped the Indian markets before, are planning to take
exposure into the equity markets through the participatory note
(PN) route,” said a senior executive of a hedge fund on condition
of anonymity.
PNs are offshore derivative instruments issued by FIIs to
unidentified overseas investors, who are not eligible to invest
directly in Indian stocks.
This calendar year has seen record foreign inflows of $14.4
billion into domestic stocks, beating $10.7 billion the FIIs
invested in 2005.
Market players point out that the sharply appreciating rupee is
one of the factors encouraging foreign players to park their
money in India.
On Thursday, the rupee touched a nine-year high of 39.25 against
the dollar. With the US economy struggling to come out of the
subprime turmoil and fears of recession, analysts reason that at
the moment only India, Hong Kong and China are emerging as a
safe-investment destinations for FIIs.
Sandip Sabharwal, the chief investment officer of JM Financial
Mutual Fund, said Indian markets still provided a lot of
opportunity for foreign clients and there was momentum in the
markets too.
Apart from the rupee appreciation, strong economic growth and the
fast growth of Indian companies were acting as a catalyst for the
huge foreign money flowing into India, he said.
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