FIIs, DIIs and RIs - Part I
Market capitalization of India's equity market touched Rs.100 Trillion ($1.67 Tn) in early December 2014. Market cap is the market value of all listed stocks multiplied by their respective market value. On a relative scale, the market cap of India is now at par with Germany & France and have surpassed those of Australia, Brazil, HongKong, Korea & Switzerland. US has the highest market cap in the world at $18.66Tn while China and Japan come next at $3.7Tn.
Five years ago, during the 2009 financial crisis, market cap of Indian equity market was Rs.30 Trillion. For those who had stayed invested for the long term, their annualized returns would have been 27% p.a. However we hear a lot about FIIs (Foreign Institutional Investors) entering and exiting the markets there by making huge money from Indian equities. Let us look at the FII and DII (Domestic Institutional Investors) statistics in detail.
FIIs (Foreign Institutional Investors)
As per recent reports, FIIs have invested up to $16 billion (~Rs.1 Lac Crore) in Indian equities in FY2014 (till 'Dec) and that is widely believed to be the single most effective factor for the markets to rise to such record highs of 28,800. It is also estimated that FIIs have a shareholding of 40% in the Indian equity market. Promoters (51.8%) and DIIs together hold a good 58% while retail participants form close to 2% shareholding across the entire stock market. FIIs fall into one of three categories - foreign government and government agencies, regulated funds such as university funds or pension funds and the rest.
P-Notes (Participatory Notes)
P-notes are an interesting class of FPIs (Foreign Portfolio Investors) since this investment vehicle has been given lot of leeway such as not requiring to register with SEBI (capital markets regulator) which keeps the ultimate owner/buyer of the P-note in dark. So far this year Rs.2.66 Trillion (or Rs.2.66 Lac Crores / $44bn) has entered Indian capital markets (Equity + Debt). As the ultimate owner is kept secret, it is widely believed that a lot of black money that exited the country comes back as white through this route. P-notes were as high as Rs.4.49Tn ($100bn) in 2007 and dropped to Rs.60,000 Crores in 2009, only to rise back to Rs.2.66Tn in 2014. We shall continue with DIIs and Retail investors in the next blog!
Five years ago, during the 2009 financial crisis, market cap of Indian equity market was Rs.30 Trillion. For those who had stayed invested for the long term, their annualized returns would have been 27% p.a. However we hear a lot about FIIs (Foreign Institutional Investors) entering and exiting the markets there by making huge money from Indian equities. Let us look at the FII and DII (Domestic Institutional Investors) statistics in detail.
FIIs (Foreign Institutional Investors)
As per recent reports, FIIs have invested up to $16 billion (~Rs.1 Lac Crore) in Indian equities in FY2014 (till 'Dec) and that is widely believed to be the single most effective factor for the markets to rise to such record highs of 28,800. It is also estimated that FIIs have a shareholding of 40% in the Indian equity market. Promoters (51.8%) and DIIs together hold a good 58% while retail participants form close to 2% shareholding across the entire stock market. FIIs fall into one of three categories - foreign government and government agencies, regulated funds such as university funds or pension funds and the rest.
P-Notes (Participatory Notes)
P-notes are an interesting class of FPIs (Foreign Portfolio Investors) since this investment vehicle has been given lot of leeway such as not requiring to register with SEBI (capital markets regulator) which keeps the ultimate owner/buyer of the P-note in dark. So far this year Rs.2.66 Trillion (or Rs.2.66 Lac Crores / $44bn) has entered Indian capital markets (Equity + Debt). As the ultimate owner is kept secret, it is widely believed that a lot of black money that exited the country comes back as white through this route. P-notes were as high as Rs.4.49Tn ($100bn) in 2007 and dropped to Rs.60,000 Crores in 2009, only to rise back to Rs.2.66Tn in 2014. We shall continue with DIIs and Retail investors in the next blog!
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