Despite equity markets gaining almost 80 per cent so far in the current year, the number of new foreign institutional investors (FIIs) coming to India has touched a six-year low.
The number of new FIIs registered with the Securities and Exchange Board of India (Sebi) has declined 70 per cent in the current calendar year. Only 111 new FIIs got registered with Sebi till November, against as many as 375 in calendar year 2008 and 226 in 2007. The total number of FIIs with offices in India was 1,705 till November.
Sebi has simplified the procedure for FII registration and reduced fees significantly, but larger market realities affected these institutions' decision to enter India and register here.
Siddharth Shah, head of fund practices, Nishith Desai Associates, said, "Following last year's global financial crisis, most FIIs have been facing redemption pressures from investors and that has resulted in shrinking of the global pool. Hedge funds, considered the most active and keen players in the Indian markets till 2008, were worst affected during the financial turmoil, resulting in several of them liquidating or significantly curtailing their international exposure to emerging markets like India."
Also, the number of new FII sub-accounts entering India declined over 60 per cent, with 475 new ones registering themselves with Sebi in 2009 as compared to 1,228 in 2008. The number of sub-accounts registered with Sebi was 5,347 as of November.
Source: Business-standard FII Registrations Fall 70%
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By ugesh sarkar, Section SEBI & Share Market
Posted on Wed Dec 02, 2009 at 11:14:34 PM EST
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The Satyam fraud that came to light in January has also affected new registrations. The average monthly registrations has declined to 11 in 2009 from an average of 32 in 2008. A total of 1,705 FIIs from 51 countries have been registered with Sebi, of which as many as 576 are from the US, 263 from the UK, 115 from Luxembourg, 85 from Mauritius, 79 from Singapore, 69 from Australia, 68 from Canada, 65 from Hong Kong and 63 from Ireland.
Among the FIIs registered in the current calendar year, 45 were from the US, 14 from the UK, 12 from Luxembourg and five each from Mauritius and Canada. Insurance and pension funds are also featured in the list of the FIIs that have registered in 2009. Among them are Allianz Variable Insurance Products Trust, Columbia Funds Variable Insurance Trust, Legal and General Assurance Society, ITV Pension Scheme and Colleges of Applied Arts and Technology Pension Plan.
Shah believes that new registrations may not pick up in the near future. He said, "At some point, relatively speaking, other markets with significant corrections will start looking more attractive than the Indian markets, which some feel have already heated up, making some existing investors re-think their India strategy or defer their plans, resulting in lowering of interest in seeking FII or sub-account registrations."
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