With an estimated 8% Gross Domestic Product (GDP) growth rate, India continues to attract Foreign Institutional Investors (FII) whose numbers have grown from 685 to 898 in a year and valued at USD 80 billion driven up by the 180 A-group companies. Funds that have over a billion dollars have seen their values treble in a year even with the recent weakening of the Rupee against the US Dollar by about 3%.
FIIs have increased positions in private companies such as Reliance, ICICI, HDFC, and Bharati Tele and public sector utilities such as ONGC, BHEL, and NTPC which explains why these stocks have contributed more to the meteoric rise of the
SENSEX index. These companies already have over a billion USD investments by FIIs. In addition, FIIs have invested over a billion USD in GAIL, Hero Honda, Grasim, Hindalco, Mahindra & Mahindra, State Bank of India, and Bajaj Auto.
Some analysts caution that while FII inflow is valued at USD 10 billion last fiscal year (April 2005 to March 2006) and already at USD 3.7 billion this year, there is a mixed message in last year’s foreign direct investment (FDI) data. They say that 50% of the FDI was not fresh inflows but moneys lying in their accounts in India or reinvested local earnings. However, this method of FDI reporting recently modified by the Reserve Bank of India is inline with international best practices.