-By Spurthi C
INTRODUCTION
What is FII?
Foreign Institutional Investor is referred to as FII. These are organisations that make investments in the financial markets of other nations; these are usually foreign pension funds, mutual funds, hedge funds, insurance firms, or investment banks. They contribute significantly to strengthening the host nation's economy and offer a number of advantages, such as:
1.Capital Inflows: FIIs significantly bolster the financial markets of the host nation with foreign cash. This larger fund pool makes it easier for companies to get financing for important infrastructure projects, R&D, and expansion. Growth and general economic activity are boosted by this.
2. Market Development: FIIs contribute best practices and industry knowledge from their native markets. As a result, financial instrument and risk management tool developments may be encouraged and the host nation's financial markets may grow.
3. Enhanced Liquidity: FIIs increase market liquidity by actively purchasing and disposing of assets. This facilitates the entry and exit of other investors, increasing market efficiency.
4. Better Corporate Governance: FIIs frequently rely their investment decisions on a company's corporate governance policies. All parties involved may gain from this since it may inspire businesses to embrace greater levels of accountability and openness.
5. Currency Appreciation: Foreign currency is converted to local currency by FIIs when they invest in a nation's financial assets. The host nation's currency may appreciate as a result, lowering the cost of imports and increasing exports.
A crucial question concerning the country's financial future arises as the Indian political scene heats up in anticipation of the 2023 elections: would Foreign Institutional Investors (FIIs) pour money into the country in droves, or will uncertainty sap their enthusiasm?
A day after the Bharatiya Janata Party (BJP) won handily in three states' assembly elections, Saurabh Mukherjea of Marcellus Investment Managers stated that foreign institutional investors (FIIs) have begun "booking their flight tickets to India." "We have also started getting calls and queries from new foreign investors to manage their assets," he stated.
Numbers also support Mukherjea's assertion. FIIs have already invested over Rs 12,200 crore in December to date, surpassing November's investment of Rs 7,000 crore. FIIs were net sellers of stocks in August, September, and October.
Fund managers have concluded that the current global macro environment, which eliminates political uncertainty, will spur further acceleration of the FII buying trend ahead of elections. They predict this tendency will likely transcend past examples and dwarf FII inflows following elections.
FIIs have been net buyers in three of the months leading up to election month, based on the historical tendency of the previous four general elections. Therefore, it is possible that cumulative FII flow will be positive in February, March, and April of 2024.
Expanding the focus to the six months leading up to elections, there was a $243 million outflow in 2009, most likely as a result of the global financial crisis, but there were significant inflows in every other case.
With the Sensex at 70,000 and Nifty climbing above 21,000, the Indian markets are now valued higher than they were in the run-up to the 2004 and 2009 elections.
The difference in value between developed markets (DMs) and emerging markets (EMs) is greater than it has ever been, though. Analysts noted that the number is below the 15-year norm, suggesting that EMs are selling at a significant discount to DMs and making India a desirable travel destination before elections.
"Emerging markets are at a discount to their 15-year high valuations. So from that perspective, there's value in the wider emerging market," said Rahul Bhuskute, Chief Investment Officer (CIO), Bharti AXA Life Insurance.
Adding to this, Mihir Vora, CIO, Trust Mutual Fund, said, "Money will flow into India as the dollar is weakening. Furthermore, US bond yields have cooled from the 5 percent levels. India-dedicated money should pour in."
According to Vora's ballpark calculation, 70 percent of FII money comes from EM index funds or global index funds, such as MSCI EM, while 30 percent comes from dedicated India funds.
Companies with highest FII holdings:
Company | FII Holding | CMP |
One97 Communications | 71.8% | Rs 705 |
70% | Rs 423.4 | |
Delhivery | 67.6% | Rs 355.15 |
HDFC | 66.2% | Rs 2659.8 |
64.8% | Rs 419.65 | |
Redington | 60.5% | Rs 179.5 |
Zomato | 54.6% | Rs 68.45 |
Max Healthcare | 52% | Rs 533.65 |
PB Fintech | 50.4% | Rs 606.5 |
Shriram Finance | 49.8% | Rs 1410.5 |
49.1% | Rs 924.4 | |
IRB Infrastructure | 48.5% | Rs 28.7 |
Max Financial | 47.7% | Rs 708.9 |
47% | Rs 4810.05 | |
Kiri Industries | 46.5% | Rs 290.6 |
ICICI Bank | 44.2% | Rs 949.8 |
ITC | 43.4% | Rs 442.15 |
IndusInd Bank | 42.2% | Rs 1292.2 |
39.7% | Rs 779.05 | |
Crompton Greaves | 39.6% | Rs 273.9 |
Kotak Mahindra Bank | 39.4% | Rs 1935.7 |
Piramal Pharma | 39.3% | Rs 81.3 |
Mahindra & Mahindra | 39.2% | Rs 1334.7 |
Standard Industries | 38.9% | Rs 26.7 |
38.8% | Rs 1393.7 |
Paytm's parent firm, One97 Communications, is first in the group with a 71.8% FII holding. Car Trade Tech comes in second with 70%, while Delhi very is third with 67.6%. HDFC is proud of its 66.2% FII holding. The well-known restaurant and food delivery aggregation platform Zomato has drawn a 54.6% FII stake.
ICICI Bank (44.2%), Axis Bank (49.1%), ITC (43.4%), Redington (60.5%), and Axis Bank (49.1%) are some noteworthy companies with significant FII interests. The list also includes Apollo Hospitals Enterprises, Mahindra & Mahindra, Piramal Pharma, AU Small Finance Bank, IndusInd Bank, and Kotak Mahindra Bank.
While high FII holdings can bring several benefits, they can also expose companies to increased volatility and market risks. The FII holdings are based on data as of March 31, 2023, and are subject to change over time.
CONCLUSION
Next year, we anticipate a strong FII-type market, which will be advantageous for growth investors. We've started purchasing consumer electronics, so maybe that will work out nicely for us. We anticipate rapid development. In India, you cannot place a wager on a company that grows by 5–10% and expect to continue compounding at 20–25%.
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