FII investment cap hiked

Mumbai: The Reserve Bank of India (RBI) has finally done it. It has allowed FIIs a higher investment limit, which can go up to the sectoral FDI limit in comparison to the 49 per cent set up earlier.

With this, FIIs can invest up to even 100 per cent in the equity of a company, provided the government has already allowed 100 per cent investment in that sector in which the company operates.

Before this amendment came in, when foreign companies could invest up to 100 per cent in the sector in terms of FDI, their investment in individual companies was restricted to 49 per cent.

In a release, the RBI said: It has been decided in consultation with the government that FII investments in Indian companies can now be increased beyond 24 per cent to the sectoral cap/statutory ceiling, as applicable, provided this has the approval of the Indian companys board as also its general body.

The move is obviously directed at popping up stock market sentiment, which has taken a beating following the terrorist attacks on America. However, as pointed out by domain-B in earlier stories, it remains to be seen how many companies will pass enabling resolutions to actually see such a hike happening.

There are very few companies where FII investment limit has been raised even to 49 per cent from 24 per cent. At present, the list includes names of ICICI, ICICI Bank, Reliance Industries, Reliance Petroleum, Satyam Computer Services, Infosys Technologies, NIIT, Crisil, HDFC, Global Telesystems and Hughes Tele.com.

Analysts feel it would take some time before investment, if at all, actually takes place, because companies would require some more time to get through enabling resolutions. They also feel that the government could have done away with enabling resolutions by the companies and allowed the FIIs to invest directly instead.