FII inflow in equities reaches all-time high of $125 bn in 2012

New Delhi: Foreign investors seem to have embraced Indian stocks yet again with net inflows crossing Rs 1.2 lakh crore ($23 billion) in 2012 and taking their total cumulative investment in the country’s equity market to an all-time high of $125 billion.

The net inflow of Rs 1.23 lakh crore during 2012 is the second-highest for a year and comes after a net outflow in the previous year 2011-preparing the ground for even better times ahead in 2013 on the back of continuing reform-push by the government and market regulator Sebi.

[caption id=“attachment_569541” align=“alignleft” width=“380”]  At gross level, Foreign Institutional Investors (FIIs) purchased stocks worth about Rs 6.5 lakh crore in 2012 . Reuters[/caption]

At gross level, Foreign Institutional Investors (FIIs) purchased stocks worth about Rs 6.5 lakh crore in 2012 and sold equities to the tune of Rs 5.3 lakh crore-translating into a net inflow of Rs 1,21,652 crore ($23 billion).

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This was the second highest net inflow by FIIs in a single calendar year since their entry into Indian capital markets in 1992. In 2010, overseas investors had made a record Rs 1.33 lakh crore ($29 billion) net investment into the share market.

However, FIIs had pulled out a net Rs 2,714 crore ($358 million) from the share market in 2011. Despite their unpredictable ‘hot money’ investment, these overseas entities have been amongst the most important drivers of Indian stock markets.

The huge inflows came despite the number of FIIs registered in India dipping to 1,755 this year from 1,767 at the end of 2011. Market experts believe the recent reforms initiatives undertaken by the government to boost economic growth and investor sentiment have led to a renewed interest among the foreign investors.

“FIIs pumped in capital into the Indian equities as the lack of investment options make the country an attractive destination. Indian market has attracted the highest amount of foreign flows compared with Asian peers so far in 2012,” Destimoney Securities Sudip Bandhopadhyay said.

CNI Research’s CMD Kishor Ostwal said, “India has had an excellent year so far after a disastrous 2011. I think Indian valuations look cheaper compared to historical average.” This is the second time in history that net FII inflows for a year have crossed the Rs 1 lakh crore mark and analysts are optimistic about the next year.

Moreover, FIIs were also seen pouring money in the debt market and infused Rs 33,777 crore ($6.4 billion) during the year in the segment. Since opening up of Indian markets for FIIs in 1992, they have made a cumulative net investment of Rs 5.67 lakh crore ($125 billion) in shares and Rs 1.55 lakh crore ($32 billion) in the debt segment.

PTI