For the first time, Indian securities held under custody by foreign portfolio investors (FPIs) have exceeded the $1 trillion mark, reaching $1.1 trillion as of September, according to data from the National Securities Depository. Of this total, $930 billion is invested in equities while the remainder is allocated to debt and hybrid instruments. Currently, FPI equity holdings account for 16.4% of India’s total market capitalization.
The $1 trillion-plus figure represents a milestone for India on its way to a higher profile in the global securities markets, and a bragging point for the Modi government’s push to liberalize investment rules. The Indian markets have provided high long-term returns over the past decade, ranking second behind the US. Ten-year annualized returns for the Sensex index, in US-dollar terms, stand at 8.5% compared to 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 main contributors to FPI inflows, together accounting for nearly $23 billion in net investments for the year, with inflows totaling $14.27 billion and $8.77 billion, respectively. FPIs invest mainly through primary markets, which include initial public offerings (IPOs), follow-on public offerings, rights issues, and qualified institutional placements.
While India still requires FPIs to report changes in registration, mergers, or ownership within seven working days, they now have 30 days rather than seven to submit the necessary documentation. And for minor changes within the investor group, FPIs now have 30 days to report and submit documents. India’s IPO market has been strong in 2024, with 50 companies raising $6 billion by August. Notable deals, including the first-ever public offering by Hyundai Motor India, have attracted FPI interest. The BSE (Bombay Stock Exchange) IPO index, which tracks newly listed companies, has surged 38% this year, and the recent 50-basis-point rate cut by the US Federal Reserve, along with expected further rate hikes this year by the Reserve Bank of India and the comparative stability of the Modi-led government, could attract more FPI inflows, observers say.
