What do Trinidad & Tobago, Russia, Brazil, Greece, Cook Islands, Israel, New Zealand and Republic of Malta have in common?
One institutional investor from each of these countries has registered as a foreign portfolio investor (FPI) with the Securities and Exchange Board of India (SEBI), aiming to reap gains from the Indian equity market.
But, while these countries have seen just one entity coming to the Indian stock market, there are many geographies from where institutional investors arrive in large numbers to cash in on returns generated in the Indian stock market.
8,000 FPIs
According to SEBI data, there are nearly 8,000 registered FPIs in India coming from almost 60 different countries across the world. Not surprisingly, U.S. leads the pack with more than 2,700 registered FPIs, followed by Luxembourg (946), Canada (622) and Mauritius (572). In all, there are 14 countries from where more than 100 FPIs have registered in India.
Incidentally, the number of FPIs domiciled in Mauritius was much higher and began to fall only after the benefits of double tax avoidance started to wean away. Simply put, FPIs from Mauritius were not required to pay any tax in India before the rules were changed.
Market participants say that an increasing number of foreign investors are attracted to India because of the higher returns when compared with some of the other leading markets, including the emerging markets pack.
“India is the best country in terms of historical returns,” said Saurabh Mukherjea, Ambit Capital, a leading domestic brokerage. “Even if you adjust for volatility and currency fluctuations, we are better than any other emerging market.”
“China is a faster growing economy but its stock market has disappointed. Indonesia comes closest to India but there is a heavy dependence on natural resources. Indian markets have generated good returns consistently and that attracts the large number of foreign investors,” he said.
Liechtenstein, Guernsey
Interestingly, the returns have attracted foreign investors from the most unexpected of places. For instance, SEBI data shows that there are investors from countries like Bahamas, Liechtenstein, Republic of Slovenia, Brunei, Bermuda, Guernsey and Jersey. Both Guernsey and Jersey are islands in the English Channel.
The Indian equity market has been quite consistent in generating returns even when viewed over a longer time frame. In the last 17 years since 2000, the Sensex has ended with losses only on five occasions (2000, 2001, 2008, 2011 and 2015). Further, the current calendar year has seen the benchmark Sensex gain more than 12% till date while touching an all-time record high of 30,184 on April 27.
Foreign investors have historically been the prime drivers of the various bull runs seen in the Indian equity market. Data from National Securities Depository Ltd. (NSDL) shows that FPIs have been net buyers of Indian equity at ₹40,911 crore or more than $6 billion.
In 2012, when the Sensex gained more than 25% in a single year, FPIs bought shares worth close to₹1.29 lakh crore. In 2014, they were net buyers at ₹97,054 crore.
