News / Asia

Foreign Investors Pour Billions of Dollars into Indian Stocks

An Indian stock broker reacts while looking at Sensex stock index at brokerage firm in Mumbai, India, 13 Sep 2010
An Indian stock broker reacts while looking at Sensex stock index at brokerage firm in Mumbai, India, 13 Sep 2010

India's stock markets have attracted a record flow of foreign investment in recent months. The magnet for investors is an economy that has recovered from the global financial crisis.     

Two years ago, India's main stock index, the Sensex, lost more than one-half its value as the global financial downturn prompted foreign investors to pull nearly five billion dollars out of the country.

But the Sensex has gained nearly 20 percent this year and is trading close to the levels prior to the financial crisis. 

Rajesh Jain, a stock market analyst in Mumbai, attributes this to the money being poured into Indian stocks once again by foreign investors, also known as FII's.     

"The markets have been driven by one single big trigger which has been sustained FII buying, and we have seen that continue through all of three, almost four months. We have seen investments by FII's of all hues and colors," said Jain.

Foreign investors have put nearly $25 billion into Indian stocks so far. That is nearly double the amount they invested in the same period last year.    

Financial analysts say international investors are investing in emerging markets like India to take advantage of higher growth and better financial returns compared to developed countries, which still face economic challenges.

India's economy is among the world's fastest growing, and has emerged virtually unscathed from the financial crisis.

The government estimates that India's economy will grow by eight and one-half percent this year. The International Monetary Fund is even more optimistic. In a recent report, it said economic growth could reach nine percent in 2010 due to growing consumer demand.

The stock market rally is not just helping private sector companies. The Indian government announced Monday that it raised about $3.5 billion by selling a 10 percent stake in state-owned Coal India, the world's largest coal mining company.

However while stock markets have attracted record investment, direct investments by foreign investors in businesses and infrastructure projects have been more sluggish compared to last year.

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