Foreign Institutional Investors (FII) and the Indian Equity market


Dec 2013

As of Dec 31, 2012, FII holdings amount to 1159 lakh crores rupees worth of Indian stocks (At 55 Rs to a dollar it is US $ 210.72 billion). There are nearly 1700 registered FII’s in India and they are responsible for 17.5% of the total market capitalization. It will not be wrong to state that is the FII decide to abandon our market and move their funds to other markets and the depreciation of the rupee is inevitable. Let us look at the amount of monies that the FIIs have invested in the Indian market over time during the month of January.

Year Amount Invested (in Rs.)
January 93 0.6 crore
January 94 1222 crores
January 95 164 crores
January 96 997 crores
January 97 331 crores
January 98 (302) crores
January 99 446 crores
January 00 157 crores
January 01 4045 crores
January 02 423 crores
January 03 888 crores
January 04 3177 crores
January 05 457 crores
January 06 1678 crores
January 07 492 crores
January 08 (13036) crores
January 09 (4245) crores
January 10 (500) crores
January 11 (4813) crores
January 12 10338 crores
January 13 19803 crores

 

Observation:

  1. Look at Jan 2008, Jan 2009 data. FIIs pulled out large amounts of money from our market due to sub-prime crisis in the US. Our sensex dropped from 22000 to 8000. We have not still recovered to reach 22000 even after 5 years.
  2. Given our current account deficit (CAD) running around 200 billion dollars, we need continued support from FII to pay for it
  3. We cannot continue to manage the current account deficit by using the short term flow of funds like the FIIs.
  4. Between Germany, China and Saudi Arabia, they have a current account surplus of over $ 500 billion dollars. India must approach them for FDI. If succeeded, the value of our rupee will stabilize and our dependence on FII funds will reduce.

 

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