The Telegraph
Since 1st March, 1999
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Money or faith, FIIs keep both

Mumbai, June 13: Twenty-one foreign institutional investors have registered with the Securities and Exchange Board of India (Sebi) since the May 17 market mayhem, lending credence to the belief that net sales by these funds are more an aberration than a trend.

Most institutions that have trooped in over the past few weeks are from the US, Canada and Europe. More important, they are affiliated to pension funds — the kind of hard-nosed investors who play for the long term.

“The institutions which have just registered would, naturally, buy shares from local bourses and may cushion the selling done by others, such as hedge funds,” said an analyst affiliated to a leading mutual fund.

On June 3, AIC Investment Services Inc, based in Canada’s Ontario, set its foot in India, taking the total count of FIIs who have pitched their camps here to 563. This is a sharp increase over the May 17 number of 542. Even on December 31 last year, a time when stock indices were galloping, the tally was a more modest 517.

AXP Partners International Series Inc of the US, Aranda Investments of Mauritius, Allianz Dresdner Asset Management and CDC Invest Funds from Boston, Ethical Funds Inc of Vancouver and Euro Mobiliare Asset Management of Italy are among the high-profile institutional investors to have signed up recently.

The list also includes Genesis Asset Managers based in Delaware, The Bank of New York, The Growth Fund of America and The Income Fund of America — the last two have their headquarters in California.

Analysts say India’s growing stature on the world stage, especially the talk of joining G-8, the forum of most powerful economic powers, will bring more FIIs to the country.

However, there is still a lot that must happen before the biggest moneybags drop anchor. Some analysts feel Indian markets lack depth in volumes, and have few quality stocks. And, until more blue-chips go public by listing on bourses, the likes of Warren Buffet’s Berkshire Hathaway would keep a distance.

Liquidity is another problem for foreign investors, though the situation has improved considerably since March, when a rush of public offers from public sector heavyweights like ONGC and Gail boosted floating stock — the volume of shares available for trading. The ONGC divestment alone is estimated to have raised the amount of shares that can change hands by 10 per cent.

All eyes are now on TCS, a technology titan whose long-awaited listing was announced last week. Some telecom companies are also planning share offers. Analysts say this could bring a new class of infotech investors.

The government, too, has not ruled out further divestment of government equity in public sector companies. On the contrary, finance minister P. Chidambaram said after his visit to Mumbai this month that he would get a global roadshow rolling after the budget.

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