Foreign investors bet long on India

MUMBAI: The India story seems to be selling strong with more and more investors willing to bet long. Foreign direct investment (FDI) in the country is 81% higher than the amount that foreign portfolio investors or FIIs have brought in since January this year.

According to the latest RBI figures, while FDI inflows between January and June amounted to $3.57bn, net FII inflows during the period was $1.98bn. Moreover, FDI in the first six months of ’06 has been 93% higher than that in the same period a year ago when the country received a total of $1.85bn as FDI.

Analysis of figures confirms the popular theory that FIIs inflows are volatile and FDI is stable. While FIIs brought in around $7bn between January and April this year, they took back about $2bn in the next two months. On the other hand, FDI inflows were steady and have been coming in at an average rate of close to $600m a month. In fact, from the balance of payments point of view, in the first quarter between April and June ’06, negative impact of portfolio investment was offset by strong FDI inflows.

FIIs have by and large been investing the entire portion brought into the country ever since they have been allowed to invest in the country’s stock market in 1994. But since October ‘05, they have been parking a significant portion of the money they brought in banks. As a result, there has been vast discrepancy in figures on FII investments in the stock markets published by Sebi and FII inflows into the country released by RBI. However, a section of the market believes that outbound FDI is higher than FDI inflows. But according to official figures, while inflows amounted to $5.5bn , FDI outflows were almost half during the year.