India is well placed to attract further foreign institutional investor (FII) inflows over the long term, according to Societe Generale Securities Services (SGSS).
In its latest Momentum newsletter, the company notes that FIIs already hold around 16% of the equity of Indias biggest 500 companies (worth around $147 billion) and account for 10-15% of equity volumes from the time they have been permitted to invest in Indian equities. As growth in the Indian economy accelerates, FII sentiment is expected to remain positive, SGSS says.
SGSS special edition of Momentum highlights that the companys asset servicing joint venture with the State Bank of India has now been fully operational for more than a year. SBI-SG Global Securities Services serves domestic and foreign institutional investors representing $7.75 billion in assets under custody and $10 billion in assets under administration.
The company cites statistics from the SEBI, which show that India has enjoyed a renewal of FII inflows, driven by sound fundamentals and growth opportunities. Although FIIs pulled $9.77 billion out of the Indian equity markets during fiscal year 2009, they were quick to return, reinvesting $8.50 billion in just the first four months of the following year. This equates to 87% of the amount pulled out. The total FII investments in India in the year 2011 stands at $122,227 million as on May 31, 2011.
SGSS also notes that in the fiscal year 2010-11, Rs 462.67 billion was raised in India through public equity issues, the third-highest amount raised in a single financial year. The record year of 2007-08 saw Rs 5,221.9 billion raised. The second highest was 2009-10, when Rs 469.41 billion was raised. The market welcomed 57 public issues during 2010-11, up 30% on a year earlier when there were 44 issues.
SGSS also observes that ETFs are becoming as popular in India as they have become elsewhere, with net inflow of around $455 million in 2010. An estimated 25% of all secondary market foreign institutional investor (FII) flows into India came through this route in 2009 (about 15-20 % of total FII flows including primary market issuance), SGSS says, citing Credit Suisse estimates.
Single-country India ETFs are still smaller compared to China or Brazil,” SGSS says. “Brazil single country ETFs, for example, are almost seven times the size of India ETFs, giving a sense of how much bigger a feature India ETFs might become in Indias investment landscape.”
On Nov. 3, 2011, Global Custodian will be hosting an interactive seminar discussing how India is no longer the country that in-sources IT projects or securities operations. It is the operational heart of the global securities industry, serving banks, broker-dealers and fund managers all over the world directly and indirectly. For further information on the event, please click here.
(JDC)