foreign portfolio investment in India

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<p>FOREIGN PORTFOLIO INVESTMENT IN INDIA </p> <p>Group no:-5</p> <p>Pradeep kumar -09020242026 Salil raibole-09020242027 Rajnish Jakhar-09020242028 Rishabh Sood-09020242029 Rishika Mittal-09020242030 Sachin Lakade-09020242032 </p> <p>Foreign Portfolio Investment</p> <p>The Foreign Exchange Management Act 2000 defines Foreign Portfolio Investment as buying and selling of shares, convertible debentures of Indian companies, and units of domestic mutual funds at any of the Indian stock exchanges It is the passive holding of securities such as foreign stocks, bonds, or other financial assets ,none of which entails active management or control of the securities issues by the investor,</p> <p>Starting up</p> <p>In 1992, India opened up its economy and allowed foreign portfolio investment in its domestic stock market Since then ,FPI has emerged as a major source of private capital inflow in this country India is more dependent upon FPI than FDI as a source of foreign investment. During 1992 -2005 more than 50 percent of foreign investment in India came from FPI.FDI &amp; FPI01/08/10 3</p> <p>How FPI Can Benefit The Real Sector Of An Economy :</p> <p>In Three Broad Ways Inflow of FPI can provide a developing non debt creating source of foreign investment.</p> <p> FPI can induce financial resources to flow from capital abundant countries, where expected returns are low, to capital scarce countries where expected returns are high.</p> <p> FPI affects the economy through its various linkage effects via the domestic capital market. </p> <p>How FPI flow can help an economy?</p> <p>FDI &amp; FPI01/08/10</p> <p>5</p> <p>Portfolio Capital Flow</p> <p>FIIs have invested more than Rs 145,000 crore rupees in the Indian stock market In 1990-helped India to mitigate its foreign exchange shortage and build high level of foreign exchange reserves.</p> <p>Factors affecting Portfolio Investment </p> <p>Tax rates on interest or dividends Interest rates Exchange rates P.I is the part of capital account on BOP</p> <p>FDI &amp; FPI01/08/10</p> <p>7</p> <p>The eligibility criteria for applicant seeking FII registration</p> <p>Applicant should have track record, professional competence,financialsoundness, experience, general reputation of fairness and integrity; The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor. The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.</p> <p>Applicant must be legally permitted to invest in securities outside 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 an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions.</p> <p>Regulations regarding Portfolio Investment by FIIsRBI has granted permission to SEBI registered (FIIs) invest in India under Portfolio investment scheme. All FIIs and their sub-accounts taken together cannot acquire more than24% of the paid up capital of an Indian economy Investment by individual FIIs cannot exceed 10% of paid up capital. Investment by foreign registered as sub accounts of FII cannot exceed 5% of paid up capital</p> <p>FDI &amp; FPI01/08/10</p> <p>10</p> <p>Regulations Regarding Portfolio Investments by NRIs/PIOs</p> <p>Non Resident Indian (NRIs) and Persons of Indian Origin (PIOs) can purchase/sell shares/convertible debentures of Indian companies on Stock Exchanges under Portfolio Investment Scheme. For this purpose, the NRI/PIO has to apply to a designated branch of a bank, which deals in Portfolio Investment. All sale/purchase transactions are to be routed through the designated branch. An NRI or a PIO can purchase shares up to 5% of the paid up capital of an Indian company. All NRIs/PIOs taken together cannot purchase more than 10% of the paid up value of the company.</p> <p>This limit can be increased by the Indian company to 24% by passing a General Body resolution). The sale proceeds of the repatriable investments can be credited to the NRE/NRO etc. accounts of the NRI/PIO whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts. The sale of shares will be subject to payment of applicable taxes.</p> <p>PORTFOLIO INVESTMENT SCHEME</p> <p>The FEMA defines the PIS, permitting NRI and FII to buy and sell shares and convertible debentures of Indian companies, and units of domestic mutual funds at any of the Indian stock exchanges. Purchase of sharesis subject to a ceiling of 5% of the paid-up share capital and 5% of the paid-up value of each series of debentures. ThePortfolio Investment Schemeallows NRIs to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India.</p> <p>Ceiling on investment under the Portfolio Investment Scheme is an overall ceiling of 5% of paid-up share capital of thcompany/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs It can be increased up to 24% Conditions need to be fulfilled for investing in mutual funds schemes on repatriable basis In order to invest on a repatriable basis, you must have an NRI or FCNR bank accountin India. The mutual fund should comply with the terms and conditions stipulated by SEBI, the amount representing investment should be received by inward remittance through normal banking channels or by debit toNREAccount/FCNR accountof the NRI.</p> <p>Application for the PIS</p> <p>A NRI can operate the PIS through only one selected branch. To operate from more than one branch, special permission from the RBI is required. Documentsrequired by designated banks to apply for the PIS. PIS application form RPI or NRI Form, with details of shares bought from the primary market Tariff Sheet of the PIS Demat Account opening form</p> <p>Sale of shares</p> <p>Through private arrangements with the approval of the RBI. sale or transfer of shares and debentures of Indian companies to other NRIs No permission is required from RBI, , however, would require permission for purchase of the shares. Short-selling or selling the shares bought by NRI investors before delivery is prohibited.</p> <p>Tax Obligations</p> <p>Investors under the PIS are liable to pay Capital Gains Tax on their investments which depends on the tenure of their stocks. Prevailing rates are deducted at source by the designated bank.</p> <p>NON-RESIDENT INDIANS PORTFOLIO INVESTMENT SCHEME Sr No 1 2 Name of Branch PNB House, Fort, Mumbai 400 001 ECE House, K.G.Marg, New Delhi-110 001</p> <p>RBI had allotted specific code to the banks dealing in PIS.Code allotted by RBI 4401 4402</p> <p>3</p> <p>Brabourne Road, Kolkata4403</p> <p>Procedure for opening of PIS Account PIS (NRE) Account Application for PIS for operating the account Letter of Authority Acceptance of Fee Schedule for PIS Form RPI (with Repatriation benefits) Annexure-I (For shares purchased through Primary Market as NRI on Repatriable basis) Nomination Form DA-1</p> <p>Procedure for opening of PIS Account (cont)</p> <p>PIS (NRO) Account Application for PIS Letter of Authority for operating the account Acceptance of Fee Schedule for PIS Form NPI (without Repatriation benefits) Annexure-II (Shares purchased as NRI through Primary Market on non-repatriation basis) Annexure-III (Shares purchased through Primary/Secondary Market during resident status/received in inheritance) Nomination Form DA-1.</p> <p>Government Initiatives</p> <p>Indias foreign investment policies allow FDI up to 26 per cent and FII of (an additional) 23 per cent in stock exchanges. Under the regulation. FIIs and the NRIs are allowed to invest in Indian Depository Receipts (IDRs) FPI have been allowed to trade in IRFs, but limits have been put in place to keep their influence under check</p> <p>Foreign Portfolio flowsPortfolio flows as a non-debt creating investment flow has increased its share in the total foreign investment flows. During the year 2003-04 these flows share in the capital flows touched an all time high of about 67.8 percent</p> <p>Foreign Portfolio Trends</p> <p>Composition of FP Flow</p> <p>Openness of Foreign Portfolio Flows in the Indian Context</p>

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