foreign institutional investor vikas

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FOREIGN INSTITUTIONAL

INVESTOR

PRESENTED BY-

Aparna Gupta (A-10)

Aarti Kumari (A-39 )Vikas Sharma (A- 46)

Prabhat mani tripathi(A-20)



Flow of presentation

How FII started in India? What does it mean? Who can be registered? How to apply?

Eligibility criteria Registration process where FII can invest? taxation Need of FII Impact in Indian market

Volatile in nature How they perform? FII vs FDI Stock market crash



How FII started in India?

India opened its stock market to foreign investors inSeptember 1992

Since 1993, received portfolio investment fromforeigners in the form of foreign institutionalinvestment in equities.

This has become one of the main channels of FII inIndia for foreigners.

In order to trade in Indian equity market foreign

corporations need to register with SEBI as ForeignInstitutional Investor (FII).



WHAT IS FII?

Foreign institutional investor means ³aninstitution established or incorporated outsideIndia which proposes to make investment in

India in securities It is used most commonly in India to refer to

outside companies investing in the financialmarkets of India.



HOW TO APPLY

An application for registration has to be made in Form A, theformat of which is provided in the SEBI(FII) Regulations, 1995and submitted with under mentioned documents in duplicateaddressed to SEBI as well as to Reserve Bank of India (RBI)and sent to the following address within 10 to 12 days of receipt

of application.

Address for applicationThe Division Chief FII DivisionSecurities and Exchange Board of India,

224, Mittal Court, 'B' Wing, 1st Floor,Nariman Point, Mumbai - 400 021.INDIA.



Eligibility

The applicant is required to have the permission under theprovisions of the Foreign Exchange Management Act, 1999from the Reserve Bank of India.

Applicant must be legally permitted to invest in securitiesoutside the country or its in-corporation / establishment.

The applicant must be a "fit and proper" person.

The applicant has to appoint a local custodian and enter into anagreement with the custodian. Besides it also has to appoint adesignated bank to route its transactions.

Payment of registration fee of US $ 5,000.00



Registration process



Where FII can invest?

Current financial instruments are available for FII investments

Securities in primary and secondary marketsincluding shares, debentures and warrants of companies, unlisted, listed or to be listed on arecognized stock exchange in India;

Units of mutual funds; Dated Government Securities;

Derivatives traded on a recognized stockexchange ; Commercial papers



Taxation

Nature of Income Tax Rate:

1. Short-term capital gains30%

2. Long-term capital gains10%.

3. Corporate dividend declared after June 01, 1997Nil

4. Interest Income20%

Short-termC

apital Gain:C

apital gain on sale of a security held for aperiod of less than one year is termed as short-term capital gain

Long-term capital gain: Capital gain on sale of a security held for

period more than one year is termed as Long-term capital gain



YEAR PURCHASE

S

SALES RS.CR US$MN

2001-02 49920 41165 8755 1846

2002-03 47061 44371 2690 562

2003-04 144858 99094 45765 9950

2004-05 217911 171696 46215 10248

2005-06 165032 150886 14146 3262



Why there is need of FII ?

FII flows supplements and augmenteddomestic savings and domestic investmentwithout increasing the foreign debt of our

country Capital inflows to the equity market increase

stock prices, lower the cost of equity capitaland encourage the investment by Indian firms

The expert group opines that FII inflows havesome savings like features



Impact Of FIIs On Indian Markets

In the past four years there has been more than $41trillion worth of FII funds invested in India.

This has been one of the major reasons on the bullmarket witnessing unprecedented growth with the

BSE Sensex rising 221% in absolute terms in thisspan.

The present downfall of the market too is influencedas these FIIs are taking out some of their investedmoney.

For long-term value investors, there¶s little becausefor worry but short term traders are adversely gettingaffected by the role of FIIs are playing at the present.



Why FII called good friend for good

time ± volatile in nature

In the Indian stock markets movement of thestock depends on the limited no of stocks

As FIIs purchase and sell these stocks there

is a high degree of volatility in the stockmarket

If any set of development encourages outflowof capital that will increase the vulnerability of

the situation in the stock market In India there have been five such incidents in

the recent past



How they perform

The degree of volatility can be attributed to thefollowing reasons:

The increase in investment by FIIs increases stockindices the stock prices and encourages further

investment . In this event when any correction takesplace the stock prices decline and there will be pullout by the FIIs in a large numbers as earning per share declines

The FIIs manipulate the situation of boom in such amanner that they wait till the index rises up to acertain height and exit at an appropriate time. Thistendency increases the volatility further



FII vs FDI

Where FDI is a bit of a permanent nature, FII fliesaway at the shortest political or economicaldisturbance

Entry and Exit is relatively very easy for an FII ascompared to FDI. Entry difficult for FDI because of infrastructure problems. Exit more difficult because of archaic labor laws

have been blamed for exacerbating small economic

problems in a country by making large and concertedwithdrawals at the first sign of economic weakness.



FDI vs FII«.

FDI is more desirable than portfolioinvestment because the investments thereunder are made directly in the capital of the

company and not in the secondary market FDI helps in increasing production and

employment , FII does not affect productionand employment .

FII investment is frequently referred to asFII investment is frequently referred to as hot hot money money for the reason that it can leave thefor the reason that it can leave thecountry at the same speed at which it comescountry at the same speed at which it comesin, in case of FDI it does¶ntin, in case of FDI it does¶nt



FIIs as major cause of market crash

( Jan 21 to Jan 29 2008)

The Indian capital markets have been leftreeling under the impact of liquidity crunch

caused by multiple factors

It began with two mega issues of reliancepower and future capital holdings, which drewout huge amounts of money from the market

FIIs bowed out from the capital market withmore than Rs 10000 crore



Crises continue«.

As result , the market came crashing down and in twodays Jan. 21 and 22 the market tumbled 2284 pointsfrom the closing levels point of Friday (jan.18)

The highlight of this fortnight was historic intra-day

shedding of more than 2300 points on BSE onJanuary 22 when trading was halted once at 10 %lower

The market again fell to 13 % during the tradingsession



Total inflow and outflow of FII during Jan.

21 to 29

Date Investment

21 Jan. - 2425.7

22 Jan - 2256.2

23 Jan - 2499.

24 Jan - 1351.2

25 Jan - 669.1

28 Jan - 1513.4

29 Jan - 285.1

Total - - 9662



Last day Investment

Reporting date

Debt /

equity

Grosspurchase ( Rscrore)

Grosssales(Rscrore)

Netinvestment (Rscrore)

NETinvestment usmillion $

3 April2008

equity 2898.6 2918.7 -20.2 5.00

debt 00 00 00 00

foreign institutional investor vikas

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