Union Budget 2004-05 has proposed a series of measures to attract the Foreign Institutional Investors (FIIs), including the FDI hike in some service sectors. In Indian equity and debt market, the role of FIIs is imperative in terms of portfolio flows. As far as the FIIs are concerned, India is an attractive place to deploy their fund profitably. But the question remains how far the FIIs are satisfied with the budget proposals announced by the Finance Minister.

Of late, Indian markets are spotted as prospective places for investment by the Foreign Institutional Investors (FIIs). Influx of hot money from various sources has been pouring into India for the last couple of years and the result is that the Indian foreign exchange reserves have increased tremendously, putting a pressure on RBI to deploy them effectively. Most of these flows have come in the form of portfolio flows in the equity and debt markets (Table 2). Since the reforms were put in place, India has witnessed over a decade portfolio flows and with each passing year, portfolio flows have gained in volumes (Table 3) and today constitute a significant portion of Indian equity markets.

According to the economic survey, FIIs' inflows have increased by 1635% during 2003-04. Net FII inflows, both debt and equity, rose to Rs. 48,968 cr during the year from a meagre Rs. 2,822 cr in 2002-03. The number of FIIs in India has increased from 517 in December 2003 to 584 in July 2004. That means 67 new FIIs have registered to invest in the Indian markets only in the last six months compared to a meagre 28 in the whole of 2002-03