In this age of transnational capitalism, significant amounts of capital are flowing from developed world to emerging economies. Positive fundamentals combined with fast growing markets have made India an attractive destination for foreign institutional investors (FIIs).
Country and firms are interested in attracting foreign capital because it helps to create liquidity for both the firms stock and the stock market in general. This leads to lower cost of capital for the firm and allows firm to compete more effectively in the global market place. This directly benefits the economy and the country.
FIIs have raised their ownership in India by 170 basis points to 20.4 per cent in 2010-11, through the purchase of depository receipts and through market operations.Overall, FIIs hold 25 per cent of market value of private sector companies and 7.7 per cent in government-owned companies.
FIIs purchased a high Rs 110,100 crore (US$ 24.73 billion) worth of shares in 2010-11. Of the shares purchased, Rs 61,300 crore (US$ 13.77 billion) was through primary sources and Rs 48,800 crore (US$ 10.96 billion) from the trading platform of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The government has taken initiatives to attract more and more FIIs by means of giving relaxation in terms of disclosing their information on weekly basis instead of daily basis. SEBI has allowed FIIs to invest US$25 billion a year in bonds issued by infrastructure companies as against the previous limit of US$5 billion. FIIs can now invest US$40 billion annually in corporate bonds.
Increased FII Activity - FIIs are expected to make more investments in the next six months, according to analysts. "In the long-term, FIIs will remain bullish on the Indian market. Moreover, in the next six months market will witness more inflows than last six-months", said Alex Mathews, Geojit BNP Paribas Research Head. Over the long term, strong domestic consumption-driven growth is expected to lead to significant positive cash flows into the country, according to AnandShah,CIO, BNP Paribas Mutual Fund.
In the era of globalization & multi-national corporate environment that every company is having two choices for survival; either to grow up to such a level, so you can compete or be a subordinate to them (surrender to them); where you don’t have your own identity. We have chosen the 1st Option i.e. to grow; and for that we have decided to expand the area of our business where Indian Government is also being helpful by encouraging such Institutional Investors globally.