The United States has beaten Singapore to become the single-largest investor in the Indian equities market, with a net investment of Rs 21,345 crore as on November 10, as per data presented in the Lok Sabha by the finance ministry.
This is a significant shift in the equity investment pattern, as the US was not even among the top 10 investors in the Indian stock market in the previous two years. The US was ranked as the fifth-largest investor with an equity investment of Rs 3,356 crore in India in 2006.
Singapore held the top position in 2008, with a net investment of Rs 12,417 crore in Indian stocks. South Korea and Luxembourg topped in 2007 and 2006, respectively, with net investments of Rs 12,235 crore and Rs 12,607 crore.
Luxembourg and France -- which were not among top 10 countries investing in Indian equities in the past two years -- became the second and third largest investors, with net investments of Rs 12,275 crore and Rs 11,765 crore, respectively, till November 10 this year, the data showed. Other major countries investing in India include Mauritius, UK, UAE and Hong Kong.
The data includes investment by foreign institutional investors (FII) and their sub-accounts. These are small accounts managed by FIIs registered with the Securities and Exchange Board of India (Sebi) on behalf of foreign institutions, corporates and funds, in return for a fee.
The government data also confirms that excess liquidity created in the previous two years as a response to the global economic crisis is finding its way into emerging economies, including India.
India is now widely expected to attract capital flows, both on the equity and debt front. The inflows are expected due to the country's growth potential, as well as the interest rate differential between India and developed countries.
The Prime Minister's Economic Advisory Council has estimated net capital inflows of over $50 billion in the current fiscal, as compared to just $9 billion in the previous fiscal. The council's chairman C Rangarajan, though, had said the inflows could be larger than expected.
FIIs have invested a total of $15.26 billion in Indian stocks till November 24, as per the Sebi data. They pulled out $12.18 billion during the same period last year, to partly overcome the redemption pressure that intensified due to the economic crisis.
The number of FIIs registered with Sebi jumped to 1,705 in 2009 from 1,573 in 2008, while the registered sub-accounts increased to 5,347 in 2009 from 4,832 in 2008, the Sebi data showed.
Expectations of rupee's due to rising capital inflows as well as dollar's weakness would also lead to greater flows as it increases the return on portfolio of foreign investors. "Due to a structural dollar weakness, coupled with an improvement in domestic growth and the balance of payments, we expect the rupee to strengthen to Rs 44 for a dollar by March 10 and Rs 41 for a dollar by March 11," Citi India said in its Global Economic Outlook and Strategy report released on Monday.
Information from Yahoo.--
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