With market sentiments turning positive due to the recovering economy, ripple effects are likely to be felt in investment patterns of corporates. The financial services space in India is a rapidly-growing one. The country received $25,888 million in foreign direct investment (FDI) during 2009-10,according to the department of industrial policy and promotion.

The year 2009-10 saw increased equity inflows, with investors steadily turning positive on equity according to mutual fund analysts. The growth of corporate investments increased from 7.8% during ?08-09 to 35.2% during ?09-10 and the investment to asset ratio decreased from 23.26% during ?07-08 to 19.17% during ?08-09. However, it increased thereafter to 22.87% during ?09-10. This was revealed in a study on the investment patterns of 480 major companies during ?09-10,?08-09 and ?07-08.

An analyst from a rating agency said: ?The increase in investments to asset ratio in the current year can be partly attributed to reduced capex expenditure in view of the economic downturn. Also, as the data reflects, increasing investment in equities may be due to corporates being less risk averse and the fact that they are investing in equities, including investment in group companies. The downturn in equity markets had offered better valuations and scope for increasing intra group holdings.?

Sample companies invested Rs 79,724 crore during ?09-10 (Rs 61,906 crore during ?08-09, Rs 55,894 crore during ?07-08) in company equity shares, Rs 12,036 crore (Rs 7,440 crore, Rs 8,313 crore) in debentures and bonds, respectively and Rs 58,087 crore (Rs 37,179 crore, Rs 44,328 crore) in mutual fund units, respectively. The share of equity in total investment increased from 43.72% during ?07-08 to 44.93% during ?08-09 and marginally decreased to 42.79% during ?09-10. The share of debentures and bonds in total investment decreased steadily from 6.50% during ?07-08 to 5.40% during ?08-09 and increased to 6.46% during ?09-10.

However, the share of mutual fund units in total investments decreased from 34.67% during ?07-08 to 26.98% during ?08-09 and increased to 31.18% during ?09-10. This trend indicates to the fact that corporates are now taking more interest in investing in equities. The significant increase in investment of equities was seen in the case of Reliance Industries, Wipro, TCS, GMR Infrastructure and Ranbaxy Laboratories.

The investment in equities of GMR Infrastructure increased by 29.8% to Rs 4,184 crore during ?09-10 from Rs 3,224 crore during ?08-09. There was more than a 100% growth in equity investment by 41 companies during ?09-10, prominent ones being Videocon Industries , Dr Reddy?s Lab, Electrosteel Castings, Strides Arcolab and Tube Investments. A significant increase in the investment of debentures and bonds was seen in the case of Reliance Industries, Wipro, Bajaj Auto, Apollo Hospitals and HT Media.