Foreign institutional investors’ (FIIs’) inflows into the Indian equity markets have touched $10 billion so far in the current financial year. After pulling out $11.54 billion (Rs 47,707 crore) from Indian equity markets during 2008-09, FIIs have made net investments of $10 bn (Rs 48,511 crore) in the first six months (April to September) of 2009-10.
The bulk of these investments have come through the primary market, rather than buying via secondary markets.
As much as 68 per cent, or $6.8 bn of the total FII inflows are coming from the former route, such as Qualified Institutional Buyers (QIBs), Initial Public Offers (IPOs) and private placements. The remainder of $3.17 bn (Rs 15,374 crore) of inflows is through stock exchanges, suggests data released by the BSE and the NSE.
The low risk in acquiring shares through the primary route and availability of bulk quantities at a discount are reasons for FIIs to invest via QIBs and conversions.
Nilesh Shah, Deputy Managing Director, ICICI Prudential, says the FIIs can buy quality shares through the primary route at stipulated prices with low impact cost. The buying in the secondary market increases the impact cost, as stock prices move to higher levels with each buy order.
FIIs invested Rs 22,333 crore in 29 companies via the QIB route; these are currently valued at Rs 31,913 crore, 43 per cent higher than their offer size.
In some stocks like DLF and Unitech, their investments had appreciated by more than 75 per cent from their issue price. Including NHPC (Rs 1,976 crore) and Adani Power (Rs 738), in just five IPOs, the FIIs made combined investments of Rs 2,768 crore.
The rupee’s depreciation against the dollar also helped FII net investments to cross $10 billion. The rupee has depreciated by 5.4 per cent, from 45.95 against the dollar in 2008-09 to 48.57 in the current financial year.
