Holdings of top FPIs double in 3 years

Rise was due to more interest in India, govt policies and surge in equity prices

The investment value of several top foreign portfolio investors (FPIs) in Indian shares has doubled or nearly doubled in the past three years.

Government of Singapore Investment Corporation (GIC Pte) has seen its investment value more than double from Rs 17,823 crore to Rs 40,571 crore, data collated from Prime Database shows.

The data looks at funds that own more than one per cent in Indian stocks and is for the period between March 2014 and March 2017.

Government Pension Fund Global, a sovereign wealth fund owned by the government of Norway, saw its investment value double from Rs 9,709 crore to Rs 19,516 crore in this period. Canada Pension Plan's investment rose 13 times to Rs 12,015 crore.

The largest FPI is EuroPacific Growth Fund, which manages assets of about $137 billion worldwide and invests in companies based chiefly in Europe and the Pacific Basin. The value of its holding in Indian stocks nearly doubled to Rs 60,507 crore. As on April 30, the Fund's top 10 holdings included HDFC Bank (2.3 per cent) and Reliance Industries (1.5 per cent).

Other top FPIs whose holdings have more than doubled include Smallcap World Fund, Capital World Growth & Income Fund, Amansa Capital and Cinnamon Capital Ltd.

Aberdeen is the only fund which seems to have been a bit bearish on India. The fund reduced its holding by a little more than two-thirds to Rs 9,693 crore by the end of March, 2017.

Reasons

The rise in holdings could, in part, be attributed to an increase in interest towards India.

"India has remained one of the fastest growing economies in the world, with a stable government to boot. Within the emerging markets space, India has been considered a better bet among foreign investors. The (ruling party's) win in the UP elections has convinced investors that the reforms process will continue," said Andrew Holland, chief executive, Avendus Capital Alternate Strategies.

Illustration: Binay Sinha

In these three years, the central government has initiated several policy changes, such as a national goods and services tax (GST), easing of foreign direct investment limits in various sectors, direct transfer of subsidy benefits, financial inclusion and digitisation measures, the Make in India project, Ujjwala Yojana and the Uday Scheme for the power distribution sector. The macro economic situation- including the Budget and trade deficits, foreign exchange reserves and inflation- has improved.

"The common thread running across reforms like GST and demonetisation seems to be a thrust towards formalisation of the economy and enhancement of tax base. Demonetisation has also resulted in a deluge of liquidity in the system, driving interest rates lower," said an India strategy report by Motilal Oswal Financial Services.

Specific to FPIs, the government has brought more clarity in the tax regime and amended tax treaties with Mauritius and Singapore.

The rise in Indian equities could have also contributed to the increase in value of investments of these FPIs. The benchmark BSE Sensex has climbed about 30 per cent between March 2014 and March 2017. "The increase in the fund's market value of Indian investments is for the major part due to market performance and currency effects towards the Norwegian krone, not increased investments," said a spokesperson for the Norwegian Government Pension Fund Global.

A few FPIs based in Mauritius and Singapore have also, it appears, rushed to take advantage of the 'grandfathering' clause in the new Double Tax Avoidance Agreement signed between the governments of the two countries and Delhi.

Note: Data takes into consideration money put into stocks where funds’ stake is more than 1%. Source: Prime Database

FPIs, one of the largest drivers of Indian equities, own roughly 25 per cent of Indian equities. Controlling stakeholders, or promoters, own almost 50 per cent.

In the past five financial years, nearly three of every four dollars, or about 75 per cent of the money put in by FPIs, have been invested in the top 10 per cent of the BSE 500 companies with the highest market capitalisation.