Indian securities managed by foreign portfolio investors (FPIs) crossed the $1 trillion mark for the first time, reaching $1.1 trillion as of September, according to the National Securities Depository. Of this amount, $930 billion is invested in equities, with the rest allocated to debt and hybrid instruments. Currently, FPI shares account for 16.4% of India’s total market capitalization.
The $1 trillion-plus figure represents a major milestone for India on its path to higher status in global equity markets and bragging rights in the Modi government’s push to liberalize investment rules. Indian markets have delivered strong long-term returns over the last decade, ranking second behind the US. The Sensex’s 10-year annualized return in dollar terms is 8.5%, compared with 9.7% for the Dow Jones Industrial Average.
As of September, the top five countries for foreign portfolio investment in India were the US, Singapore, Luxembourg, Ireland and Mauritius. The US and Singapore were the major contributors to FDI inflows, accounting for a total of nearly $23 billion in net investment for the year, with inflows of $14.27 billion and $8.77 billion, respectively. FPIs invest primarily through primary markets, which include initial public offerings (IPOs), follow-on public offerings, rights issues and qualified institutional placements.
While India still requires FFIs to report changes in registration, mergers or ownership within seven business days, they now have 30 days instead of seven to file the required documentation. And in case of minor changes within the investor group, FPIs now have 30 days to report and file documents. The Indian IPO market has been strong in 2024, with 50 companies raising $6 billion by August. Notable deals, including Hyundai Motor India’s first-ever public offering, have attracted FPI’s interest. The BSE (Bombay Stock Exchange) IPO index, which tracks newly listed companies, is up 38% this year, as well as the recent 50 basis point rate cut by the US Federal Reserve and further rate hikes expected this year by the Reserve . Observers say the Bank of India and the relative stability of the Modi-led government could attract more foreign direct investment.