New Delhi: Indian stock markets may be emerging as one of the most attractive destination for overseas investments, but when it comes to foreign institutional investors (FIIs), large blue chips score over their smaller counterparts by a huge margin. Out of the total FII inflow into the country last year, the top 100 companies accounted for 80.34% of their investment, while their exposure in top 150 companies was even more at 88%, think-tank National Council of Applied Economic Research (NCAER) says.
The highly-skewed distribution of FII flows implies that not all enterprises have been able to attract inflows, it said, adding that investments are going mostly into companies with strong fundamentals.
More than 60% of the above 150 companies are among the BSE 100 index, it said. Investments in strong companies mean that the threat of capital flight and volatility of flows is smaller, the report said.
Highlighting the advantages, the report said the benefits of FII inflows are not limited to improving the availability of funds and supplementing domestic savings. The gains include education in modern managerial practices and greater scrutiny of corporate governance. These effects are difficult to measure, but highly relevant for the growth of enterprises, it said.
Annual FII inflows have always been on the rise. By February, FII inflows touched $52 billion (Rs2,24,900 crore) in terms of net investments in equity and debt markets. About 90% of FII flows in India is made up of equity flows. At the end of 2005-06, 1,159 Indian companies received FII flows.
The RBI and Sebi have also modified their regulations to facilitate greater inflow of capital in both unlisted and listed entities as well as debt instruments, it added.