India is one of the top 10 economies globally, with vast potential for the banking sector to

grow. The last decade witnessed a tremendous upsurge in transactions through ATMs, and
Internet and mobile banking. In 01!, the country"s #s $1 trillion %&'( 1.)! trillion*
banking industry is set for a greater change. Two new banks have already received
licences from the government. +urthermore, the #eserve ,ank of India"s %#,I* new norms
will provide incentives to banks to spot potential bad loans and take corrective steps that
will curb the practices of rogue borrowers.
The Indian government"s role in e-panding the banking industry has been significant.
Through the +inancial Inclusion .lan %+/ 1001)*, banking connectivity in the country
increased more than three1fold to 11,)! villages in 01) from 23,24! at the beginning of
the plan.
,anks are also looking at new ways to attract customers. In 'eptember, 01), I5I5I bank
leveraged the popularity of the social platform, and launched its +acebook banking
service, .ockets. The service enables customers to transfer funds and pay bills from within
the website.
The revenue of Indian banks increased four1fold from &'( 11.$ billion to &'( !2.4 billion
during the period 0010010. In the same period, the profit after ta- increased from &'(
1.! billion to &'( 1 billion.
In 0101), Indian banks had 130 overseas branches %12) in 01101* while foreign
banks had )12 branches in India %)04 in 01101*.
5redit to housing sector grew at a compound annual growth rate %5A6#* of 11.1 per cent
during the period +/ 00$01). Total banking sector credit is e-pected to grow at a 5A6#
of 1$.1 per cent %in terms of I7#* to touch &'( .! trillion by 013.
,anks and housing finance companies %8+5s* together en9oyed a 0 per cent growth in
home loans in +/ 01)01!. 8ome loans disbursed by banks and 8+5s collectively grew
by #s 1.20 trillion %&'( 2.:4 billion* in +/ 01)01! to reach #s 4.20 trillion %&'(
1:4.:$ billion* at the end of the fiscal.
Indian banks operating abroad en9oyed a higher credit growth in comparison to foreign
banks operating in India, as per an #,I survey on international trade in banking services
for 0101). According to the survey, growth of credit e-tended by Indian banks"
branches operating overseas grew by )1.3 per cent to #s :$:,:30 crore %&'( 43.)2
billion*; credit e-tended by foreign banks based in India increased 3.: per cent to touch
#s )03,300 crore %(:1.1: billion*.
The 5abinet 5ommittee on <conomic Affairs %55<A* has given the green signal to a
proposal to increase foreign holding in A-is ,ank from !4 per cent to 2 per cent. The
move could bring in overseas investment of nearly #s 3,:0 crore %&'( 1.0 billion* into
the country. The 55<A nod is dependent on +IIs" holding capped at !4 per cent.
India"s banking sector has the potential to become the fifth largest banking sector globally
by 00 and the third largest by 0:. The industry has witnessed discernable
development, with deposits growing at a 5A6# of 1. per cent %in terms of I7#* in the
period +/ 0201); in +/ 1) total deposits stood at &'( 1,3!.) billion.
Today, banks are turning their focus to servicing clients. ,anks in the country, including
those in the public sector, are emphasising on enhancing their technology infrastructure, in
order to improve customer e-perience and gain a competitive edge. The popularity of
internet and mobile banking is higher than ever before, with 5ustomer #elationship
Management %5#M* and data warehousing e-pected to drive the ne-t wave of technology
in banks. Indian banks are also progressively adopting an integrated approach to risk
management. Most banks already have in place the framework for asset0liability match,
credit and derivatives risk management.
Introduction
India has attracted the highest foreign investment among emerging economies in 01!. At
&'( !.1$ billion, the country=s foreign institutional investor %+II* inflows are higher than
that of other emerging economies such as Taiwan %&'( ).2 billion*, Indonesia %&'( .!
billion*, ,ra>il %&'( 1. billion* and 'outh Africa %&'( 0.3 billion*.+urther, foreign
investors invested about #s )31,)! crore %&'( 21.24 billion* in Indian stocks in the four
years ended ?ecember 01). These figures highlight the impact of foreign investment in
India"s growth as an economic power.
India"s economic growth is, however, a recent development. @f the many factors for its
progress, foreign investment is among the primary reasons. Ahen the 6overnment of
India decided to allow 100 per cent foreign direct investment %+?I* in several sectors, it
gave rise to a market full of possibilities. <mpowered by the 5entre"s initiatives and the
rela-ing of investment rules, sectors such as automobiles, construction and real estate,
among others, have blossomed.
FII Key Statistics
In 01), foreign investors infused a net #s 1,1)0 billion %&'( 1$.32 billion* in
eBuities.
Total number of +IIs registered in India was 1,310 in +/ 1!.
An aggregate net investment of #s 3.0$ trillion %&'( 113.:2 billion* have been
made in shares by +IIs, since they entered the Indian market in 144.
FII Key Investments and Developments
+IIs invested around #s 34,304 crore %&'( 1).) billion* in the country"s eBuity market in
+/ 1!, according to data released by the 'ecurities and <-change ,oard of India %'<,I*.
?uring the year, foreign investors invested ma9orly in domestic eBuities markets as Indian
eBuity markets gave some of the best returns among emerging countries, as per market
analysts.
+IIs bought debt securities worth #s $,1:: crore %&'( 1.): billion* and sold bonds to the
tune of #s !,204 crore %&'( 32:.24 million* in the period Canuary 1010, 01!, which
resulted in a net inflow of #s ),:!2 crore %&'( :$4.10 million*, according to data
provided by '<,I. Their total investment in debt and eBuity in the period was about #s
!,041 crore %&'( 234.!4 million*.
The #eserve ,ank of India"s %#,I* efforts to attract foreign e-change were rewarded at
the end of 01), with remittances from non1resident Indians %7#Is* reaching &' (1).31
billion in 7ovember. &nder foreign currency non1resident 0 banks D+57#%,*E category,
the deposits touched &'( )$.2 billion at end of 7ovember, 01) up from &'( !.30
billion in @ctober, 01), as per #,I data.
The #,I has allowed 8indu9a +oundries to increase its foreign investment limit up to 20
per cent of paid1up capital. This increase in investment limit is under the .ortfolio
Investment 'cheme %.I'*. 8indu9a +oundries is a group company of multi1billion dollar
8indu9a 6roup which is headBuartered in Fondon.
Total +II investment in eBuity and debt in India crossed the &' (10 billion mark on April
, 01!. +IIs invested another &'( 100 million in Indian shares the same day, taking the
+II purchases in the year %up to April , 01!* to &'( !.1$ billion. In the debt market, +II
investments stood at &'( 2.1) billion.
,ritain=s Tesco has sealed an agreement with Trent Ftd 0 a retail unit of the Tata 6roup 0
that will see it invest &'( 1!0 million and become the first foreign supermarket to foray
into India"s &'( :00 billion retail sector. The deal is a :0G:0 9oint venture %CH* with Trent
8ypermarket Ftd %T8F* 0 the operator of the 'tar ,a>aar retail business.
Government Initiatives
+IIs and 7#Is will now be able to invest in the insurance sector, within the 2 per cent
ceiling on +?I. The department of industrial policy and promotion %?I..* confirmed in a
press note that the rela-ation would also apply to insurance brokers, third1party
administrators %T.As*, loss assessors and surveyors. The investments can be made under
the automatic route.
The 6overnment of India is planning to split overseas inflows into +oreign .ortfolio
Investment %+.I* and +?I, with a minimum composite ceiling of !4 per cent. The
proposal, which is under consideration by a panel headed by <conomic Affairs 'ecretary
Mr Arvind Mayaram, recommends an aggregate automatic limit of ! per cent of +.I,
which can be increased up to the e-tent of +?I allowed under the automatic route. The +.I
comprises +IIs and Iualified +oreign Investors %I+Is*.
In a move to boost foreign investment, '<,I has rela-ed norms for foreign investors in the
debt category. +IIs will be allowed to purchase government securities straight from the
market and bypass the monthly auction managed by the regulator. The move could bring
more investments into the country.
Road Ahead
Aith supportive government policies in place, +IIs should continue to prosper in India"s
economy. As for the present, the outlook is encouraging. +oreign investors" net inflows
touched #s 1 trillion %&'( 12.20 billion* in stocks in India during 01), the third time +II
investments have crossed the figure since they entered the Indian market in 144. Total
investments in the country=s eBuity market also reached an all1time high of &'( 1:0
billion in 01). <-perts are eBually bullish about 01!. According to market analysts,
sectors such as food and beverages, financial services, pharmaceuticals and biotechnology,
and software, among others, are attractive to +IIs.
Foreign Institutional Investors (FIIs): Increasing rend In India
+oreign institutional investors have gained a significant role in Indian capital markets.
Availability of foreign capital depends on many firm specific factors other than economic
development of the country. In this conte-t this paper e-amines the contribution of foreign
institutional investment particularly among companies included in sensitivity inde-
%'ense-* of ,ombay 'tock <-change. Also e-amined is the relationship between foreign
institutional investment and firm specific characteristics in terms of ownership structure,
financial performance and stock performance. It is observed that foreign investors invested
more in companies with a higher volume of shares owned by the general public. The
promoters" holdings and the foreign investments are inversely related. +oreign investors
choose the companies where family shareholding of promoters is not substantial. Among
the financial performance variables the share returns and earnings per share are significant
factors influencing their investment decision.
Introduction
<ntities covered by the term J+II" include K@verseas pension funds, mutual funds,
investment trust, asset management company, nominee company, bank, institutional
portfolio manager, university funds, endowments, foundations, charitable trusts, charitable
societies, a trustee or power of attorney holder incorporated or established outside India
proposing to make proprietary investments or investments on behalf of a broad1based fund

+oreign portfolio inflows through +IIs, in India, are important from the policy perspective,
especially when the country has emerged as one of the most attractive investment
destinations in Asia. In this paper an effort has been made to develop an understanding of
the investment decisions, trading strategies and behavior of the +IIs in the Indian eBuity
market.

Aith the emerging market crises of the late 1440s, the role of +oreign .ortfolio Investment
%+.I* and the ma9or players therein i.e. the foreign institutional investors %+IIs* has come
under intense scrutiny by academics as well as policymakers. A general perception about
the +IIs is that they are speculators and their investment is motivated by short1 term gains.
The +IIs in pursuit of short1 term gains adopt short1 term trading strategies such as positive
feedback trading and herding %i.e. buy or sell stocks together as a group*. 'uch behavioral
biases of +IIs, it is believed, may lead to price overreaction and contribute to the creation
or e-acerbation of a financial crisis.
!hat is FII" #o$ it is permitted"
An investor or investment fund that is from or registered in a country outside of the one in
which it is currently investing. Institutional investors include hedge funds, insurance
companies, pension funds and mutual funds.
The term is used most commonly in India to refer to outside companies investing in the
financial markets of India. International institutional investors must register with the
'ecurities and <-change ,oard of India to participate in the market. @ne of the ma9or
market regulations pertaining to +IIs involves placing limits on +II ownership in
Indian companies.
Foreign Direct Investment in India is permitted as under the %ollo$ing %orms o%
investments:
Through financial collaborations.
Through 9oint ventures and technical collaborations.
Through capital markets via <uro issues.
Through private placements or preferential allotments.
+?I is not permitted in the following industrial sectorsG
Arms and ammunition.
Atomic <nergy.
#ailway Transport.
5oal and lignite.
Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper,
>inc.
Foreign direct investments in India are approved through t$o routes:
&' Automatic approval by RBI: The #eserve ,ank of India accords automatic approval
within a period of two weeks %provided certain parameters are met* to all proposals
involvingG
+oreign eBuity up to :0L in ) categories relating to mining activities.
+oreign eBuity up to :1L in !$ specified industries.
+oreign eBuity up to 3!L in 4 categories.
+?I up to 2L in the Insurance sector is allowed on the automatic route sub9ect to
obtaining licence from Insurance #egulatory M ?evelopment Authority %I#?A*
Investments in high1priority industries or for trading companies primarily engaged in
e-porting are given almost automatic approval by the #,I.
FDI in India on automatic route is not allo$ed in the %ollo$ing sectors:
.roposals that reBuire an industrial licence and cases where foreign investment is
more than !L in the eBuity capital of units manufacturing items reserved for the
small scale industries.
.roposals in which the foreign collaborator has a previous ventureNtie1up in India.
.roposals relating to acBuisition of shares in an e-isting Indian company in favour
of a +oreignN7on1#esident Indian %7#I*N@verseas 5orporate ,ody %@5,*
investor; and
.roposals falling outside notified sectoral policyNcaps or under sectors in which
+?I is not permitted andNor whenever any investor chooses to make an application
to the +oreign Investment .romotion ,oard and not to avail of the automatic route.
2. FIPB Route: +oreign Investment .romotion ,oard %+I.,* is a competent body to
consider and recommend foreign direct investment, which do not come under the
automatic route. 7ormal processing time of an +?I proposal in +I., is ! to 2 weeks. +I.,
is located in the ?epartment of <conomic Affairs, Ministry of +inance. Its constitution is
as followsG
'ecretary, ?epartment of <conomic Affairs %5hairman*
'ecretary, ?epartment of Industrial .olicy M .romotion %Member*
'ecretary, ?epartment of 5ommerce %Member*
'ecretary, %<conomic #elation*, Ministry of <-ternal Affairs %Member*
+I., can co1opt 'ecretaries to the 6ovt. of India and other top officials of financial
institutions, banks and professional e-perts of industry and commerce, as and when
necessary.
Foreign Investment Implementation Authority (FIIA)
6overnment has set up +oreign Investment Implementation Authority %+IIA* to facilitate
Buick translation of +oreign ?irect Investment %+?I* approvals into implementation by
providing a pro1active one stop after care service to foreign investors, help them obtain
necessary approvals and by sorting their operational problems. +IIA is assisted by +ast
Track 5ommittee %+T5*, which have been established in )0 MinistriesN?epartments of
6overnment of India for monitoring and resolution of difficulties for sector specific
pro9ects.
Factors contri(uted signi%icantly to the FII %lo$s to India:
Regulation and rading )%%iciencies: Indian stock markets have been well regulated by
the stock e-changes, '<,I and #,I leading to high levels of efficiency in trading,
settlements and transparent dealings enhancing the confidence level of +IIs in increasing
allocations to India.
*e$ Issuance: Ae have witnessed e-tremely high Buality issuance during the year from
companies such as 7T.5, @765 and T5' leading to strong +II participation with
successful new issuance of over ( nine billion, yet another record for the year.
Attractive +ar,ets: Indian eBuity markets continue to be attractive to foreign investors
with e-pected earnings growth of over 1) per cent compared with negative growth
e-pected among competing countries in the region such as Taiwan and Oorea. Indian blue
chips are seen to have high Buality of balance sheets with net debt to eBuity of the top )0
companies being negative, with net cash on the balance sheets. 8owever earnings growth
is e-pected to be lower than last year and upside in stock prices will be sub9ect to
sentiments in the global markets and foreign flows to emerging markets. 8owever high
Buality new issuance from .'&s and other large corporates will continue to see good
demand from +IIs. 8owever domestic mutual funds have been net sellers of eBuities
during 00! with risk aversion still prevalent among local investors after seeing several
short periods of high volatility. Aith the booming stock markets presently catching the
headlines in local press, this trend will hopefully reverse during 00:.
-utsourcing: The rhetoric over outsourcing of 9obs to India has died down after the &'
elections and demand will soar for Indian ,.@ and software services companies. 8owever
Indian software companies will need to enhance margins by going up the value chain to
high level consulting and scaling up the pro9ect si>es. 'ignificant outsourcing
opportunities will also open up in te-tiles and drugs with dismantling of Buotas for te-tiles
and introduction of product patent regime for pharmaceuticals.
In%rastructure: Aoefully inadeBuate infrastructure is the biggest bottleneck for the
growth and profitability of Indian corporations. The administration needs to move much
faster in privatisation of .ro9ects in the areas of power, transportation, ports, airports and
other urban infrastructure to enhance competitiveness. This is particularly relevant due to
the fact that competing countries in Asia .acific and 5hina have moved at a much faster
pace during the last five years and have in place a first world infrastructure.

.ape/ .ycle: Aith strong balance sheets, high liBuidity in the banking system, supportive
capital markets and growing demand for goods and services we e-pect to see a strong
wave of capital e-penditure cycle during the year leading to tremendous opportunities for
Indian eBuities.
Dollar !ea,ness: Analysts continue to look for a weak &' dollar with the &' twin
deficits %budget and trade deficits* unlikely to be resolved anytime soon. 'tudies have
shown that flows into emerging markets rise significantly during times of dollar weakness
and India will continue to be a beneficiary of this trend. Indian #upee is e-pected to
strengthen further during 00: which will be particularly favourable for domestic demand
oriented businesses such as banks and automobiles.
Rising .ommodity 0rices: ?emand supply dynamics in both crude and metals call for
higher prices during 00: with increasing 5hinese demand and economic recovery in
Capan. This has inflationary implications for India going forward, though it will be a boon
for commodity counters.
.onsolidation: +II activity has been focused on large cap companies due to liBuidity
reasons, and hence several high Buality mid cap companies trade at a valuation discount
due to lack of investor demand. Ae e-pect to see significant merger activity among mid
caps which will enable them to gain better valuations under the institutional radar screen,
in addition to consolidation efficiencies. Ahile 5hina attracts significantly higher +?I,
India with its highly developed capital markets will be a beneficiary of +II flows at
increasing pace each year. To summarise, Indian markets have successfully absorbed the
gains seen during 00) and consolidated well during 00! with a modest gain and look set
to outperform the global financial markets during 00:.
rends o% FII investment in India:
Past years FII investment in India


+II investment in IndiaG
/ear
6ross purchases %#s
crore*
6ross sales %#s
crore*
7et Inv %#s cr*
144) ,221.40 22.$ ,:4:.10
144! 4,23.0 ,!32.10 2,341.0
144: 2,22:.40 ,$1.0 ),$:).$0
1442 1:,3)4.0 !,4):.20 10,$0).20
1443 1$,42.:0 1,314.0 2,03.)0
144$ 1),$44.$0 1:,)34.30 11,!34.40
1444 )3,11.:0 )0,:1!.30 2,242.$0
000 33,222.20 31,1::.!0 2,:11.0
001 :2,344.0 !),:02.:0 1),4.30
00 :,!!2.00 !,3!2.30 244.)0
Total 12332145'4 &24425&5'6 772896'66


2009: FII Investment is increasing in India:

7early half of the #s 30,000 crore offshore investments that have come into Indian
bourses this fiscal, till @ctober 004, are from alleged ta- havens such as Mauritius, 8ong
Oong and Fu-embourgPthe three together contributing almost #s :,000 crore of the net
inflow from foreign institutional investors %+IIs*.
'ignificant omissions from this list are +IIs of 'ingapore and 'wit>erland, the
two countries that had figured among the top five with the highest investments in Indian
eBuities during the economic slowdown of 00$. +IIs from the two countries had put in
over #s 1:,000 crore last year. The government has said there is no cause of concern on
the strong +II flow into stock markets with finance minister .ranab Mukher9ee stating that
regulators were keeping a close watch on the money flow and would act if it was alarming.

Till @ctober 004, +II held eBuities totalled more than (120 billion. According to a
finance ministry statement, the highest investments have come from &'1based +IIs, to the
tune of #s 1,)!! crore till 7ovember 10. 'econd on the list is Fu-embourg with #s
1,3: crore. +rance, Mauritius, the &O, &A<, 8ong Oong, Australia, 7orway and
5anada are the other countries in the top 10, in that order.
Investments from Mauritian +IIs have been #s 4,!00 crore, ahead of the &O %#s
!,400 crore*, &A< %#s !,$00 crore* and 8ong Oong %#s ),!)$ crore*.
Ahat can be of concern for the government is the rising share of participatory
notes %.7s* in the total +II flow into stock markets. 'ince the identity of .7 investors is
not known, the government had put a tight leash last year on such investments after it
feared that some dirty money may have entered the market riding on .1notes. The story
was similar in 002 when Fu-embourg topped all other countries with ma-imum
investment of #s 1,200 crore. The top four that year included 'ingapore, 8ong Oong and
&A<Pthe &' was a distant fifth with #s ),)00 crore +II investments


One-third of investments made via PNs:
.oor market conditions towards the end of 00$ had forced the government to remove
restrictions on participatory notes %.7s*, but it had asked +IIs to register in India rather
than investing through .7s. It is estimated that of net +II inflows of #s !!,000 crore
during 'eptember1@ctober 004, nearly a third, or #s 1!,000, crore investment was on
account of .7s.

Findings and .onclusion:

?omestic sources of outside finance are limited in many countries, particularly
those with emerging markets. Through capital market liberali>ation, foreign capital has
become increasingly significant source of finance.
'ince India is a labour intensive country. Therefore, in developing countries like
India foreign capital helps in increasing the productivity of labour and to build up foreign
e-change reserves to meet the current account deficit. +oreign Investment provides a
channel through which country can have access to foreign capital.

It is reBuired to understand when they withdraw their funds and when they pump in
more money. 8igher 'ense- indices and high price earnings ratio are the country level
factors attracting more foreign investment in India.
This paper empirically observed that the research that market performance is the
strong basis for attracting more foreign investment for the individual companies in India.
The foreign institutional investors with draw their money when the stock market
performance starts sliding down.
:rie% -vervie$
The services sector has been a great stimulus to the Indian economy accounting for :2.4
per cent of the gross domestic product %6?.*, wherein the financial services segment has
been a ma9or contributor. The growth of the financial sector in India at present is nearly
$.: per cent per year.
?ominated by commercial banks which have over 20 per cent share of the total assets,
India"s financial sector comprises commercial banks, insurance firms, non1banking
institutions, mutual funds, cooperatives and pension funds, among other financial entities.
The last two decades have seen the sector developing a more contemporary outlook. The
6overnment of India has helped in this development, introducing reforms to liberalise,
regulate and enhance the country"s financial services. Today, India is recognised as one of
the world"s most vibrant capital markets. 7otwithstanding challenges, the sector"s future
seems to be in good hands.
Insurance Sector
?igital channels will influence nearly 3: per cent of the insurance policies sold by 00
during the pre1purchase, purchase or renewal stages, according to a report titled
J?igitalQInsurance10R ,y 00" by ,oston 5onsulting 6roup %,56* and 6oogle India.
According to the report, insurance sales from online channels will be 0 times what it is
today by 00, with overall internet influenced sales e-pected to be around #s )00,0000
!00,000 crore %&'( :0.)1023.02 billion*.
Indian insurance companies will spend #s 1,100 crore %&'( .01 billion* on information
technology %IT* products and services in the current year, a 1 per cent increase over 01),
according to 6artner Inc. This forecast takes into account spending by insurers on internal
and e-ternal IT services, software, hardware and telecommunications. The software
segment is predicted to be the fastest developing e-ternal segment, which is increasing at
1$ per cent in 01! overall, driven by the growth of insurance1specific software.
:an,ing Services
Indian banks operating overseas saw higher credit growth in comparison to their foreign
counterparts operating in India, according to #eserve ,ank of India"s %#,I* survey on
international trade in banking services. The survey for 0101) showed growth of credit
e-tended by Indian banks" branches operating overseas to have increased by )1.3 per cent
to #s :$:,:30 crore %&'( 4$.1$ billion*.
Increased growth in agriculture and services sectors as well as in the personal loans
segment, helped bank credit grow during the April07ovember period of 01) by 3. per
cent; during the same period of 01, bank credit growth stood at 2.2 per cent. S8igher
growth in credit to agriculture may be attributed to the e-pected better kharif crop which
has been announced by the Ministry of Agriculture,S stated the report by credit rating
agency 5A#< #atings.
+utual Funds Industry in India
More than $0 per cent of Indian investors are satisfied with their mutual fund schemes,
according to a survey by +inancial Intermediaries Association of India %+IAI*. The survey
also stated that 20 per cent of the mutual fund investors were satisfied with services of
advisers and distributors of investment schemes.
0rivate );uity2 +ergers < Ac;uisitions in India
Mergers and acBuisitions %MMA* activity between India and the <uropean &nion is poised
to grow in +/ 01!01:, according to Mumbai1based investment bank Avendus 5apital.
The IT and business process outsourcing %,.@* industry are e-pected to lead the way in
scouting for acBuisitions in <urope.
.rivate eBuity %.<* firms invested &'( .3 billion in the period of Canuary0March 01!,
a 4) per cent increase from the investments %&'( 1.1$ million* made during the same
Buarter of 01). There were five investments of &'( 100 million or more in the Buarter
against one in the corresponding period of 01).
Foreign Institutional Investors (FIIs) in India
7on1resident Indians %7#Is* and +IIs will now be allowed to invest in the insurance
sector, within the overall 2 per cent cap on foreign direct investment %+?I*. The
department of industrial policy and promotion %?I..* in a press note confirmed that apart
from insurance companies, the rela-ation would also cover insurance brokers, third1party
administrators %T.As*, surveyors and loss assessors.
+IIs were gross buyers of debt securities valued at #s )0,22 crore %&'( :.03 billion* and
sellers of bonds worth #s 11,!:0 crore %&'( 1.41 billion* in the period Canuary 10!,
01!, which resulted in a net inflow of #s 1$,$12 crore %&'( ).1: billion*, according to
data released by the 'ecurities and <-change ,oard of India %'<,I*. Also, during the same
period, +IIs invested #s ),!3) crore %&'( :$.1 million* into the eBuity market, making
their total investment in debt and stocks to be around #s ,$4 crore %&'( ).3) billion*.
+oreign investors invested about #s )31,)! crore %&'( 2.: billion* into India"s stock
market in the four years ended ?ecember 01). This figure surpasses the investments in
the boom years of 00:00$.
Investments by +IIs in the Indian stock market crossed the #s 1 trillion %&'( 12.33
billion* mark in ?ecember 01) 0 the third time this has been achieved since +IIs" entry
into the capital market in 14404).
Financial Services in India: Recent Developments
American <-press 5o. has bought a minority stake in ,engaluru1based payment device
maker <>etap Mobile 'olutions. In +ebruary 01!, <>etap had received venture funding of
#s !4.$ crore %&'( $.)! million* from a group of investors headed by venture fund 8elion
Henture .artners. SThis investment is a validation about what we are doing and the
potential of the market,S said Mr Abhi9it ,ose, cofounder of <>etap.
7on1banking financial company %7,+5* Manappuram +inance Ftd %M+F* has entered
into an agreement to acBuire Milestone 8ome +inance 5ompany from Caypee 8otels. The
transaction is M+F=s strategy to broaden its business by venturing into the profitable
lucrative housing finance space, as per a press statement released by the company.
Financial Services: Government Initiatives
6iven the growth of the Indian film industry, Third <ye 5inema +und %T5<+*, a '<,I1
registered alternative investment fund, is set to enter the Indian market. Those not
connected with the 8indi film segment will now soon be able to reap the benefits of the
sector"s growth. T5<+ aims to generate about : per cent returns.
In an effort to give impetus to bilateral ties, India and 'outh Oorea have decided to
strengthen cooperation in many key sectors, including trade, investment and defence. 7ine
pacts in different fields, including one in cyber space cooperation, were inked following
talks between the Indian prime minister and the 'outh Oorean president.
Road Ahead
India is one of the top 10 economies in the world, helped in no small part by its strong
banking and insurance sectors. It is e-pected to become the fifth largest banking sector in
the world by 00 and the third largest by 0:, according to a 9oint report by O.M605II.
The report e-pects bank credit to grow at a compound annual growth rate %5A6#* of 13
per cent in the medium term leading to better credit penetration.
The insurance sector also has bright times ahead. Fife Insurance 5ouncil, the industry
body of life insurers in India, has estimated a 5A6# of 101: per cent over the ne-t few
years for the segment, with the country"s insurable population pro9ected to touch 3:0
million by +/ 00.

Introduction