India’s Foreign Institutional Investor Inflows Highest Since 2001

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Jun. 6 – The current economic trends affecting the global market have not been overly positive recently, even in countries such as China and India. For the latter, GDP growth for of 5.3 percent for the January to March 2011-2012 period was the lowest in nine years. This was a bit of a surprise considering forecasts estimated a level closer to 6 percent.

Although this figure can still be considered robust when compared to developed markets in Europe or North America, it represents a failure to keep up with expectations. Are such GDP figures an indicator that the growth in India has come to halt?

In this respect, it is interesting to see that total inflows from foreign institutional investors (FIIs) were the highest since 2001 in equity and debt during the first five months of the current year.

Inflows from FIIs such as hedge funds, insurance companies, pension funds and mutual funds in equity and debt between January and May stood at US$11.89 billion, more than the inflow of US$10.54 billion recorded in the same period in 2010 and much more than the US$2.68 billion seen last year. However, inflows have gone down considerably after February, and especially in April and May, as compared to the first two months.

“The total inflows in equity and debt, in fact, had reached US$12.64 billion at the end of March. However, it declined to US$11.71 billion at the end of April due to the net outflow of US$927 million in April. In May, the total inflow in equity and debt had turned positive with a US$178 million accrual,” reports the Business Standard.

Government action is needed to provide a political framework to maintain India as an attractive destination for FII inflows.

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