Half of all FII money comes from tax havens

New Delhi: Nearly half of the Rs 70,000 crore offshore investments that have come into Indian bourses this fiscal, till October 2009, are from alleged tax havens such as Mauritius, Hong Kong and Luxembourg—the three together contributing almost Rs 25,000 crore of the net inflow from foreign institutional investors (FIIs).      Significant omissions from this list are FIIs of Singapore and Switzerland, the two countries that had figured among the top five with the highest investments in Indian equities during the economic slowdown of 2008. FIIs from the two countries had put in over Rs 15,000 crore last year.      The government has said there is no cause of concern on the strong FII flow into stock markets with finance minister Pranab Mukherjee stating that regulators were keeping a close watch on the money flow and would act if it was alarming.      Till October this year, FIIheld equities totalled more than $160 billion. According to a finance ministry statement, the highest investments have come from US-based FIIs, to the tune of Rs 21,344 crore till November 10. Second on the list is Luxembourg with Rs 12,275 crore. France, Mauritius, the UK, UAE, Hong Kong, Australia, Norway and Canada are the other countries in the top 10, in that order.      Investments from Mauritian FIIs have been Rs 9,400 crore, ahead of the UK (Rs 4,900 crore), UAE (Rs 4,800 crore) and Hong Kong (Rs 3,438 crore).      What can be of concern for the government is the rising share of participatory notes (PNs) in the total FII flow into stock markets. Since the identity of PN investors is not known, the government had put a tight leash last year on such investments after it feared that some dirty money may have entered the market riding on P-notes. One-third of investments made via PNs  New Delhi: Poor market conditions towards the end of 2008 had forced the government to remove restrictions on participatory notes (PNs), but it had asked FIIs to register in India rather than investing through PNs.      It is estimated that of net FII inflows of Rs 44,000 crore during September-October, nearly a third, or Rs 14,000, crore investment was on account of PNs.     In 2007, Hong Kong, Mauritius, Singapore, Switzerland and UAE not only figured among the top seven countries from where maximum FII inflows came into the stock market but their combined investment was over Rs 27,000 crore.      The story was similar in 2006 when Luxembourg topped all other countries with maximum investment of Rs 12,600 crore. The top four that year included Singapore, Hong Kong and UAE—the US was a distant fifth with Rs 3,300 crore FII investments.