Portfolio Investment by Foreign Sources

Portfolio Investment by Foreign Sources faced a decline during the year 1997-98 and after that further decline was recorded in terms of both foreign institutional investment and GDRs.

Portfolio Investment by Foreign Sources at a glance:

Fresh inflows of investments from foreign sources enervated from USD 1,926 million in 1996-97 to USD 979 million in 1997-98. During the year 1998-99, the expenditure was lesser than the inflows in the previous year. The expenditure for 1998-99 had been USD 752 million whereas, the inflows in the previous year were USD 973 million.

GDRs witnessed a rise of USD 645 million during the year 1997-98 which was almost lower than half the amount of GDRs of USD 1366 million in the year 1996-97. A major decline in portfolio investment followed till the year 1998-99, which witnessed only USD 15million rise in GDRs as compared to USD 612million rise during the year 1997-98. The indented scenario of domestic capital market and the enhanced emerging market risk-perception causes this decline in the portfolio investment by foreign entities.

Portfolio Investment by NRIs-

Portfolio investments by the NRIs have undergone a number of liberalization measures that have been effective since 1998-99 in favor of NRIs. The ceiling for investment in an enterprise by all NRIs/ PIOs/ OCBs through stock exchanges have been directed in a separate route, which does not include investment ceiling available for FIIs. The total investment ceiling for NRIs has been increased from 5 percent to 10 percent of the paid up capital of the enterprise. Furthermore, the portfolio investment carried out by a single NRI has increased from 1 percent to 5 percent of the paid up capital. The policies attached with the same have also eased.

Portfolio Investments by FIIs-

FIIs are permitted to buy and sell government securities as well as Treasury Bills within the entire approved debt ceilings. The authorized dealers are allowed to provide concealment to the fresh equity investments carried out by the FIIs in order to ensure better risk management by the investors. In addition to this, the transactions made for Indian stocks among the FIIs will not require post-facto confirmation from the reserve Bank of India anymore. The unlisted debt securities of Indian firms are permitted about 100 percent FII debt funds in terms of portfolio investment.