FIIs? equity exposure falls, but their numbers rise sharply in ?08

Since the beginning of calendar year 2008, FIIs have reduced their exposure to the Indian market by selling equities worth Rs 13,666 crore (over $3.5 billion) to date. But the number of FIIs registered with Sebi has risen significantly.

In the first one-and-half-months of the year, 68 new FIIs have registered. This number is significant as it is almost a third of the total number of FIIs registered with Sebi in calendar year 2007. The last year had seen 226 new FIIs entering the Indian market and pumping in over $17 billion.

The count has now jumped to 1,287 against 1,219 until December 2007. Subsequently, the number of sub-accounts registered with Sebi has also gone up by 194 to 3,838 in February 2008 from 3,644 in December.

Of the 68 new FIIs, those from the US continue to lead the pack with 22 entities. The UK?s share is 11 and six took the Mauritius route. Others came from destinations as diverse as the Cayman Islands and the Bahamas.

Market experts are not worried over the new trend of declining capital flows from FIIs despite their rising numbers.

Gurunath Mudlapur, CIO, Atherstone Capital Markets, said

?Following the conditional ban imposed by Sebi on the issue of participatory notes by the sub-accounts in October last, more and more such entities are getting registered as FIIs and hence, we see the number of FIIs rising. As far as inflows are concerned, FIIs have withdrawn money from the Indian market due to problems faced by them in their home markets. But I think most of them are taking home good returns.?

Mudlapur added that, as valuations got compelling, India might again see FIIs grabbing the opportunity. ?Once the problems in their home market get resolved, they have to come back to emerging markets and India will be definitely amongst them.?

Some experts also believe that the increase in the number of FIIs can also be attributed to the simplification of the registration process by Sebi after mid-October, when the regulator brought in a new regime for the issuance of participatory notes. Since the beginning of November 2007 to date, as many as 163 new FIIs and 368 new sub-accounts have registered with Sebi.