NRIs bet big on Indian stocks

Net buyers of shares worth nearly Rs 94 crore in the current calendar year.

At a time when retail investors are shying away and institutional investors are in a state of flux, a niche set of investors is slowly increasing exposure to the domestic equity market. Non-resident Indians (NRIs) have been collectively putting in a sizeable amount of money in the secondary market, apart from investing in most initial public offers (IPOs).

According to data with stock exchanges, NRIs have been net buyers of shares worth nearly Rs 94 crore in the current calendar year. While this is small compared to other classes of investors, the data show that NRIs will end 2010 as net buyers for the first time since 2007.
 

WHAT IS THEIR ROLE 

• NRIs will end 2010 as net buyers for the first time since 2007
• NRIs have been net buyers in most of 2010, except January and December
• Most NRI investors are long-term in nature and prefer largecaps 
• They prefer the ‘buy and hold’ strategy while investing in companies
• They prefer only the well-known names in IPOs

Also, the yearly flows will be the highest since separate data for NRIs are being maintained. NRIs have been net buyers in most of 2010, except January and December.

Market players attribute this to the economy’s impressive growth rate and the returns generated by the stock market in recent years. “Most NRI investors are long-term in nature and prefer largecaps to known names,” says Pankaj Pandey, head (research), ICICI Direct. “They like to hold on to their shares and do not generally indulge in aggressive churning. They prefer the ‘buy and hold’ strategy while investing in companies that have a good earnings outlook and, at the same time, have a good dividend paying history. While IPOs are also popular among NRIs, they prefer only the well-known names.”

In the primary market, NRIs have invested in most recent issues. Government-owned entities are one of their favourites, say market participants. Rough estimates put the NRI investment in the primary market at Rs 50 crore this year.

According to data collated by Karvy, NRIs have put in a sizeable number of bids in all issues, including Shipping Corporation of India, Power Grid Corporation, Electrosteel, Gujarat Pipavav and Ramky Infrastructure. In Power Grid and SCI, NRIs were allotted 15.6 million shares and 309,000 shares, respectively; in Electrosteel, 780,000 shares.

While the share of NRI bids is less than one per cent of the total portion reserved for retail and high net worth individuals, it is much higher compared to the IPOs of previous years. “NRIs invest in large numbers in good quality IPOs and have increased their exposure this year,” says Uday Patil, director (investment banking), Keynote Corporate Services. “The returns provided by the Indian stock market are higher than most other markets of the world and this has attracted a lot of NRIs.”