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Investments by FIIs’ in stock market cross Rs 1 lakh crore mark in 2013

Foreign Institutional Investors (FIIs) equity investments in the Indian stock market have crossed Rs 1 lakh crore so far in 2013, while inflows are likely to boost up further after state assembly poll results have improved the probability of a BJP-led government at the Centre.

As per SEBI information, FIIs, key investors in the Indian stock market, were gross buyers of shares worth Rs 7,46,334 crore and sellers of equities worth Rs 6,45,757 crore till December 6, 2013. This translates into a net inflow of Rs 1,00,577 crore ($18 billion). 

Since FIIs entry into the country’s capital markets in 1992-93, net inflows have exceeded Rs 1 lakh crore only in 2010 and 2012. The overseas investors had net invested Rs 1,28,360 crore in 2012, while in 2010, they made a record net inflow of Rs 1,33,266 crore.

As per experts, fund inflow by FIIs will step up further in the coming months as a major win for Bharatiya Janata Party (BJP) in assembly elections has improved the likelihood of the party coming to power at the Centre in 2014.

Noticeably, of the total net inflow, around Rs 37,000 crore flowed in during the last 3 months, following the steps taken by the RBI to resurrect the weakening rupee and revive economic growth.

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SEBI merges FIIs and QFIs into new FPIs category

Stock market regulator, the Securities Exchange Board of India (SEBI) announced Foreign Portfolio Investor (FPI) regulations aimed at wooing foreign investors. SEBI, through these new rules, intends to ease the registration process and operating framework for foreign investors. Under FPIs, SEBI has included all Foreign Institutional Investors (FII) and Qualified Foreign Investors (QFI).

What are the key features of the new FPI regime?

Under the new FPI regulations, SEBI has merged all existing FIIs and QFIs in the new FPIs class.

The FPI class will be divided in three categories as per their risk profile.

  1. Category I FPIs:  It would enlist the the lowest risk entities including foreign governments and government related foreign investors.
  2. Category II FPIs: It would comprise of broad based funds, appropriately regulated entities, funds whose investment manager is appropriately regulated, university funds, university related endowments, pension funds etc.
  3. Category III FPIs: It would cover all others not eligible under the first two categories
  • SEBI has also approved setting up ‘Designated Depository Participants (DDPs)’, which would register FPIs on behalf of the market regulator subject to compliance with KYC norms.
  • The new FPI regime makes the KYC norms and other registration procedure much simpler as compared to existing process.
  • FPIs will be granted permanent registration. Currently foreign investors are given only one year or five year approval to invest in the country.

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GoI appoints panel to define FDI and FII

Government of India set up a four member committee headed by Arvind Mayaram, Economic Affairs Secretary to clear the ambiguity between Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII). The panel will look into the difference between them and it will also give definition of FDI and FII.

Finance Minister of India in his Budget speech (2013-14) had proposed to follow the international practice with regard to definitions of FDI and FII. He had said that if anyone investing in a company 10% or less is considered as FII and above 10% is considered as FDI.

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