Impact of FIIs on shareholder value creation by Indian corporates

Abstract

Foreign institutional investment is an integral form of portfolio investment flow from mainly industrialized nations into India. The Indian stock market opened its doors to foreign investors in September 1992, since then we have seen significant flow of FII (in equity as well as debt markets). In its earlier stages, the average monthly inflow in the first half of 2001 was to the tune of Rs. 19 billion, while in the first half of 2007, the inflow was over 10 billion dollars (Rs. 450 billion approximately). Majority of the FII holding is in the equity markets (93.56%) & the rest is in debt markets. The total net investments by FIIs in Indian equities is 52.76 billion dollars (from 1993 – 2008). As of November 28, 2008, 1581 FIIs and 4824 sub-accounts were registered with the Securities and Exchange Board of India (SEBI). To put it succinctly, we quote a World Bank report (India: Role of Institutional Investors in the Corporate Governance of their Portfolio Companies)