Even after investing over Rs 200,000 crore (Rs 2000 billion) in the Indian markets so far, foreign institutional investors' appetite for Indian paper seems to be growing.
According to leading analysts, India has the potential to attract over Rs 100,000 crore (Rs 1000 billion) FII investments this year. Over 882 FIIs (686 a year back) are now registered in India, and the number is increasing every day.
So, why are FIIs investing so aggressively in India when stocks in other markets are cheaper when compared with Indian blue chips?
Market players say the reason is simple: India is currently the only economy in the world where annual growth is envisaged at over 8 per cent.
According to GDP growth projections for 2006-07 by CLSA Asia Pacific Markets, China's GDP is expected to grow by 3-5, Hong Kong 4.3 per cent, Singapore 4.6 per cent, Indonesia 3.5 per cent and Malaysia 1 per cent.
Infrastructure is seen as the key contributor to the India story. FIIs expect fast-track infrastructure development in India over the next five to ten years.
For example, 26,000 MW power projects, involving a total investment of Rs 1,15,000 crore (Rs 1150 billion), have been proposed in Maharashtra, Tamil Nadu, UP, Orissa, Andhra Pradesh, Himachal Pradesh, Rajasthan and West Bengal.
The comprehensive maritime policy has proposed an investment of $1 trillion, and investments worth Rs 70,000 crore (Rs 700 billion) are in the pipeline for irrigation, railways, water and waste management projects. Another Rs 65,000 crore (Rs 650 billion) will be invested in metro projects, flyovers and national highways.
The Bharat Nirman Yojana proposes to spend Rs 1,70,000 crore (Rs 1700 billion) on electricity, irrigation, drinking water, rural housing and rural road connectivity. The
National Urban Renewal Mission has proposed Rs 1,00,000 crore development plans for cities and villages. Urban development, including transport systems for all major cities, airport improvement, water and sanitary systems, will require a spend of around Rs 35,000 crore (Rs 350 billion).
It is true that most other countries are now available at lower price to earning ratios ranging between 8.3-20 times. And that is because their GDP is not growing and/or posting lower growths - be it Thailand, Korea, Malaysia, Brazil, Taiwan Singapore or China.
