Who says FIIs are running away?

7 Jul, 2008, 1057 hrs IST,Shailesh Menon, ET Bureau

MUMBAI: The Indian stock market may be the secondworst performing one among emerging markets this year, but that has not deterred a host of foreign portfolio investors who are keen on putting their money in local stocks. The sustained interest in India, which is perceived to be a long-term economic growth story, seems to be reflected in the growing number of overseas portfolio investors, registering with stock market watchdog the Securities and Exchange Board of India (SEBI) to invest in stocks here. At the last count, the number of foreign institutional investors (FIIs) who have registered with the regulator has risen to over 1,400 while sub-account registrations have topped the 4,000-mark. According to officials, among the new investors who have signed up are some Middle East sovereign wealth funds and several institutional investors from the US, including some pension funds. The rise in their numbers has also got to do with the fact that SEBI has eased the norms for sub-accounts well over a month ago. While most investors attribute the rise in numbers to the relaxing of entry rules, the closure of the participatory note (P-note) route and keen investment interest among broad-based funds - hedge funds and sovereign wealth funds included - are reckoned to be other compelling reasons, as their interests are usually smaller accounts, which the foreign portfolio investor manages for a smaller group, including partnership firms and

FIIs diverting their investments to emerging economies

6 Jul, 2008, 1320 hrs IST, PTI

NEW DELHI: Having sold Indian shares worth close to Rs 5 trillion since beginning of this year, the overseas investors seem to be ploughing back the money to the bond market in India and abroad as well as equities in other emerging economies such as in Latin America. After a sharp rally for the past few years, the Indian stock market has been under an intense bear grip since January this year, which has seen the total value of all listed stocks here plunging by more than a third or over Rs 25,00,000 crore. Out of this, FIIs are estimated to have incurred a loss of close to Rs 3,00,000 crore, which is also equivalent to nearly one-third of their total holdings before the downslide began on the bourses. FIIs are estimated to have sold shares worth more than Rs 4,70,000 crore so far in 2008. While the overseas investors have

also purchased shares worth about Rs 4,40,000 crore in this period, on a net basis, they have pulled out investment worth over Rs 25,000 crore (over $6.5 billion). In the wake of continuing negative global cues such as rising crude prices, bearish phase in international markets and domestic concerns like soaring inflation and moderating economic growth, the analysts expect FIIs to continue to remain net sellers in Indian equity market in coming months. Although the experts are divided on where FIIs are diverting their investments, some believe they are getting attracted to equities in Latin America and bonds in the US. "The FIIs are mostly covering their losses and investing in Latin American markets. With the currency appreciation and higher interest rate differentials, Latin America is increasingly becoming attractive for the foreign investors," leading rating agency Crisil's Principal Economist D K Joshi said. Some analysts also believe that the overseas funds going back to their local markets. "The FIIs are placing their bets safe. They are taking the funds back and investing in the US bond market. They are mostly booking profit and recovering losses," PriceWaterHouseCooper Executive Director Sanjay Hegde said. Even in India, while FIIs have been net sellers in the equity, they have been mostly buyers in the bonds with a net investment of more than Rs 2,000 crore (over 500 million dollars) so far in 2008.

Economists feel an immediate reversal in FIIs' stance towards Indian equities is not expected soon because of the prevailing uncertainties in the crude market and the country's political scenario. "With the crude predicted to touch 175 dollars a barrel and the Indian currency depreciation, FIIs will turn their focus to the commodity market which has emerged as an alternate asset class. They would prefer to stay invested in the commodity market and hedge against inflation," Crisil's Joshi said. The analysts feel that a bounce back could be seen around December with the soaring oil prices likely to cool down by that time. "With the reduced risk appetite of the FIIs and the Indian growth moderation, the foreign investors are likely to turn their focus back to India towards the end of 2008 when the political and crude related uncertainties are expected to tame down," Joshi added.

rs now finding their way into India 8, 1900 hrs IST,Aman Dhall & Dheeraj Tiwari, ET Bureau

LHI: Petro dollars are now finding their way into India. Surprising it may sound but High s (HNIs) and financial institutions (read sovereign wealth funds) in the Middle-East are now rou to India through private equity firms.

to sources in the private equity space, Middle-East based investment houses such as Global In uwait), Abu Dhabi Investment Authority (ADIA) and Dubai Investment Group (UAE) are in dia-focused private equity firms to invest in their funds. In fact, the investments from the Midd x months has seen a whopping surge of more than 300%. Already Anil Dhirubhai Amaba olding, Reliance Communication, is in talks with global private equity and Middle East soverei on sourcing capital for the proposed MTN de

nternational Monetary Fund (IMF) expecting oil and gas exports to bring in $940 billion to the r te equity players are expecting a windfall of petro dollars in the country. "The Middle East ery rapidly, thanks to the petro dollars. All these investment houses have deep pockets. The fr made these private equity firms in the Middle East diversify their risks and there is a greater pro ide the US, where traditionally they've been investing," a source told SundayET.

m Middle-East countries such as Oman, Abu Dhabi, Qatar and Dubai are currently on a lookout nies which have exposure in realty, infrastructure, healthcare, retail, and education sector. "It is g funds but personal funds, supported by HNIs in countries such as Brunei, the United Arab and Oman, which are looking to tap opportunities in India," the source

to Ranu Vohra, MD and CEO of Avendus Capital, it is the growing clout of sovereign funds st which are behind the recent heightened activity in this space. "In fact, in the last few month approached by a few Middle-East based funds. They are either looking at direct investments in partnerships with investment banks and firms which have a solid distribution network and are c

their money into profitable ventures," he said. ADIA, which is eyeing an opportunity in India, est international sovereign wealth fund, as per Morgan Stanley res

to Mr Vohra, this trend can be attributed to the shift in focus to emerging markets. "Earlier th ng to tap opportunities in the Middle-East North Africa (MENA) region but now they're also l ng markets such as India," he said. Another factor, according to Abhey Yograj, chairman an s the Indian firms' mindset towards investments from Middle-East funds. "The fact is that Indian to private placements from the Middle-East because they're a good bargain and are cheap, com ing from other countries. Further, the risk of Asian assets has considerably reduced and they o ies than in the US or Europe," he explaine

irms agree that the activity from the Middle-East would only increase. "Though we only have ou US, but with correction in the Indian stock markets, the companies are looking attractive a And with such large funds at their disposal, Middle East firms are likely to be bullish on id Raj Mishra, managing partner of Indea Capital. According to Morgan Stanley, sovereign f $113bn of investments globally. An e-mail to Middle-East PE firms, Swicorp, NBK Capital (sub ank of Kuwait) and Ithmar Capital, elicited no response.