FPIs’ holdings of Indian securities cross $1 trillion for the first time
Foreign portfolio investors (FPIs) have amassed stakes in Indian securities crossing the $1 trillion mark for the first time, a milestone that underlines the country’s growing appeal among global investors.
At the end of September 2024, assets of FPIs under custody in India stood at $1.1 trillion (Rs 84.4 trillion), with $930 billion (Rs 78 trillion) invested in equities and the rest allocated to debt and hybrid instruments, according to data from National Securities Depository Limited. This figure represents a threefold increase from the Covid-19 low of $329 billion (for the quarter ending March 2020). Over the same period, India’s market capitalization quadrupled to Rs 474 trillion ($5.6 trillion).
Indian markets have delivered high long-term returns, second only to the US. The ten-year annualized return for the Sensex in US dollars is 8.5 percent, compared to 9.7 percent for the US Dow Jones index.
Liberalized investment rules and a supportive regulatory framework have played a key role in achieving this $1 trillion milestone.
Currently, FPI’s equity holdings account for 16.4 percent of India’s total market capitalization – down from 20.1 percent in December 2020, driven by robust inflows from domestic mutual funds and retail investors.
India first opened its doors to FPIs in 1992 (then known as foreign institutional investors, or FIIs), in the wake of the 1991 balance of payments crisis. At the start of NSDL’s data records in 2012, total FPI assets under custody were $243 billion (Rs 13.4 trillion). This figure surpassed $350 billion in 2014 and broke the $500 billion mark in 2017.
The major sources of FPI flows to India are the US, Singapore and Luxembourg.
First publication: Oct 8, 2024 | 12:05 pm IST