Investing in India in 2018 is a good opportunity for FIIs and also for those investors who wants to invest through FDI route. What makes India an attractive investment destination in 2018 is what elucidated in the presentation.

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Investingin India– AMegaOpportunity
By
CMADr.V.V.L.N.Sastry
Director
FirstcallIndiaInvestmentBanking
Premier Investment
Banking….
&
Equity Research House….

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FDI, FPI, FIIFDI, FPI, FII
FDI as the name suggests is investing directly from another country. Precisely, a
foreign company which is based in some other country invests India .
FPI is an investment in only financial assets such as stocks, bonds etc. by a company
located in another country. In contrast to FDI, a portfolio investment is an
investment made by an investors who is not involved in the management and day to
day business of a company
FII is an investor of group of investors who bring FPIs. Institutional investors include
hedge funds, insurance companies, pension funds and mutual funds. They participate
in the primary and secondary market activities mostly.
For a developing country like India, the total capital requirements cannot be met
with internal sources only, so foreign investments become an important part in
supplying capital

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Foreign investment in India - FDI
Currently, FDI is permitted in all sectors except in the following:
• Lottery business, including government or private lotteries or online lotteries
• Gambling and betting, including in casinos
• Chit funds and ‘Nidhi’ companies
• Trading in Transferable Development Rights (TDRs)
• Real Estate business or construction of farmhouses
• Manufacture of cigars, cheroots, cigarillos and cigarettes, and tobacco or tobacco
substitutes
• Activities and sectors not open to private sector investment, e.g. atomic energy and
railway operations (other than those specifically permitted)
• Collaboration on foreign technology in any form, including licensing of franchises,
trademark, brand names, management contracts for lotteries, and gambling and
betting activities
India’s FDI policy covers 27 sectors and activities with sectoral caps or conditions for receiving foreign
investment. These sectors include Insurance, Construction and Development, Retail, Telecom and Media.

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A Foreign Institutional Investor may investA Foreign Institutional Investor may invest
only in the following:-only in the following:-
1. Securities in the primary and secondary markets including shares, debentures and warrants of
companies listed or to be listed on a recognized stock exchange in India; and
2. Units of schemes floated by domestic mutual funds including Unit Trust of India, whether
listed on a recognized stock exchange or not
3. Units of scheme floated by a collective investment scheme
4. Dated Government Securities
5. Derivatives traded on a recognized stock exchange
6. Commercial papers of Indian companies
7. Rupee denominated credit enhanced bonds
8. Security receipts
9. Indian Depository Receipt
10. Listed and unlisted non-convertible debentures/bonds issued by an Indian company in the
infrastructure sector, where ‘infrastructure’ is defined in terms of the extant External
Commercial Borrowings (ECB) guidelines
11. Non-convertible debentures or bonds issued by Non-Banking Financial Companies categorized
as ‘Infrastructure Finance Companies’(IFCs) by the Reserve Bank of India
12. Rupee denominated bonds or units issued by infrastructure debt funds
13. Indian depository receipts; and
14. Such other instruments specified by the Board from time to time.

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Facts Check – FDI Inflows in IndiaFacts Check – FDI Inflows in India

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Facts Check – FDI Inflows in India – Sector wiseFacts Check – FDI Inflows in India – Sector wise

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From where these FDI inflows are flowing to IndiaFrom where these FDI inflows are flowing to India

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FDI flows into states up to 1% of totalFDI flows into states up to 1% of total
inflowsinflows

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A glance at FII/FPI InflowsA glance at FII/FPI Inflows

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Facts Sheet – FII inflows between 2004 and 2018Facts Sheet – FII inflows between 2004 and 2018
Dec - 2004 1,335,272 31,726 10,553,611 164,489 690.4% 418.5%
Dec - 2005 1,827,595 42,911 12,770,302 199,038 598.7% 363.8%
Dec - 2006 2,210,454 51,444 13,177,053 205,378 496.1% 299.2%
Dec - 2007 2,914,069 68,771 19,478,743 303,596 568.4% 341.5%
Dec - 2008 2,380,972 56,840 18,196,931 283,618 664.3% 399.0%
Dec - 2009 3,223,598 74,604 18,818,309 293,303 483.8% 293.1%
Dec - 2010 4,539,126 103,647 48,114,353 749,912 960.0% 623.5%
Dec - 2011 4,539,424 103,898 49,049,846 764,493 980.5% 635.8%
Dec - 2012 5,829,577 128,332 53,284,373 830,492 814.0% 547.1%
Dec - 2013 6,903,983 147,428 55,086,120 858,574 697.9% 482.4%
Dec - 2014 7,727,373 161,118 56,322,406 877,843 628.9% 444.8%
Dec - 2015 8,081,884 167,216 56,681,299 883,437 601.3% 428.3%
Dec - 2016 8,336,449 170,852 64,703,112 1,008,465 676.1% 490.3%
Dec - 2017 9,312,666 185,424 65,778,102 1,025,220 606.3% 452.9%
Feb - 2018 9,434,361 187,338 65,894,927 1,027,041 598.5% 448.2%
YEAR
ENDED
CUMM.
INV(Rs
m)
CUMM.
INV(US
$ m)
CUMM.
VALUE(
Rs m)
CUMM.
VALUE(
US$ m)
%
GAIN(R
s m)
%
GAIN(U
S$ m)

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Why India for Investments?
Are we growing vis-à-vis other economies?
Answer: Yes (see the below table, self explanatory)

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What are the slow down murmurs?What are the slow down murmurs?
In India the current slowdown is due to the policy “shocks”
of 2016, Demo and 2017 GST implementation. However, in
the long run, this should give way to better growth after
2018.

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Why India, a Rockstar for investments?
Though India’s GDP growth slowed down from 7.9% in 2015–16 to 6.8% in
2016–17 as its cash-strapped economy hit its other-wise robust expenditure
on consumption after demonetization. Nevertheless, the pace of the country’s
economic growth has outstripped that of any other economy in the world
(including China, which followed closely with a 6.7% growth). This trend is
expected to continue.
Implementation of structural reforms, loosening of supply-side bottlenecks
and appropriate fiscal and monetary policies as the key drivers of this growth.
Unlike the case of many other export-led economies, what gives a tremendous
boost to India’s GDP is its high domestic consumption, which supports its
growth and makes it resilient to global economic upheavals. The domestic
demand or household consumption rates account for around 60% of India’s
GDP, compared to 37% in China.

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Why India, a Rockstar for investments?Why India, a Rockstar for investments?
The recent reforms set in motion in the country, and India’s strong economic growth
inculcates confidence among international investors.
The Indian economy is the third largest economy in the world, after China and the US,
in terms of purchasing power parity (PPP) and the fifth largest in terms of nominal
GDP.
It is one of the major G-20 economies with an average growth rate of around
7% over the last two decades.
With regard to its major economic sectors, agriculture employs more than half of
India’s population. And while the sector’s contribution to the country’s overall GDP
has been declining over the years, the farm output in India is the second largest in the
world. India is among the top three global producers of several crops, including wheat,
rice, pulses, cotton, peanuts, fruits and vegetables.

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Why India, a Rockstar for investments?Why India, a Rockstar for investments?
The manufacturing sector is the main area of focus of India’s current government, which aims
to bring up the segment’s contribution to the country’s GDP from 15–18% at present to an
ambitious 25%.
The main initiatives taken by the Government to achieve this goal are ‘Make in India’ and
‘Skill India’.
The Services sector is the largest contributor to India’s GDP, and accounts for over 60% of its
GDP. The sector attracts the highest foreign investment (among all the sectors) through
its IT, banking and communication services and contributes significantly to the country’s
earnings from export.
Its favorable demographic dividend is another plus point for India. By 2025, it is projected to
account for 20%of the world’s working-age population, and by 2020, to be the youngest
country in the world with the median age of 29 years. Also, by 2020, for every dependent
person (the elderly or children), there are expected to be two employable individuals (in the
working age group of 15–64 years).

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Why India, a Rockstar for investments?Why India, a Rockstar for investments?
Its demographic edge is expected to play a significant role in India’s growth story
over the medium term. It also accentuates India’s attractiveness as a very favorable
investors’ destination with an abundant supply of cheap, young and skilled labor.
Going forward, India’s macroeconomic fundamentals are expected to remain strong
and get a boost from a number of the Government’s focused initiatives.
Some of the key reform measures undertaken by it in 2016 included:
Demonetization, FDI reforms, Implementation of GST, Ease of Doing Business
(EoDB), and Development of infrastructure.

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Why investment in equities?
Equities are the best in total expected returns

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Global Takeaways and conclusion
Global Takeaways
A tighter FED policy and fiscal expansion may nudge US yields
higher, and Eurozone yields are also likely to rise more.
Commodities are expected to rise. Industrial metals are likely to
reflect strong growth.
Gold will be vulnerable to rising yields.
Oil prices may increase
Conclusion
Stable earnings, if not substantial growth in the near term, and
above average valuations compared to developed world equities
should continue to support emerging market equities including
India.

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