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Foreign Institutional Investments

Foreign Institutional Investments

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Published by: nitesh01cool on Aug 27, 2009
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12/18/2013

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PREFACE

1. OBJECTIVES:

The basic objective is to know the Foreign Institutional Investments in

detail.

To put forth the role played by Foreign Institutional Investments in

sensex.

To know the guidelines for investment by Foreign Institutional
Investments

2. METHODOLOGY:

Secondary data sources and literature review.

Various books and articles from magazines and newspapers have been

referred.

3. LIMITATIONS:

The project limits itself into the India regarding the Foreign Institutional

Investments.

The legal aspects regarding Foreign Institutional Investments are
reported in the project considering India.

EXECUTIVE SUMMARY

Foreign Investment refers to investments made by residents of a country in financial

assets and production process of another country. It can affect the factor productivity of

the recipient country and can also affect the balance of payments. In developing countries

there was a great need of foreign capital, not only to increase their productivity of labor

but also helps to build the foreign exchange reserves to meet the trade deficit.

It can come in two forms: Foreign Direct Investment (FDI) and Foreign Portfolio

Investment (FPI).Foreign direct investment involves in the direct production activity and

also of medium to long-term nature. But the foreign portfolio investment is a short-term

investment mostly in the financial markets and it consists of Foreign Institutional

Investment (FII).

India, being a capital scarce country, has taken lot of measures to attract foreign

investment since the beginning of reforms in 1991. Till the end of January 2003 it could

attract a total foreign investment of around US$ 48 billions out of which US$ 23 billions

is in the form of FPI. FII consists of around US$ 12 billions in the total foreign

investments. This shows the importance of FII in the overall foreign investment

programme.

As India is in the process of liberalizing the capital account, it would have

significant impact on the foreign investments and particularly on the FII, as this would

affect short-term stability in the financial markets. Hence, there is a need to determine

the push and pull factors behind any change in the FII, so that we can frame our policies

to influence the variables which drive-in foreign investment. Also FII has been subject of

intense discussion, as it is held responsible for intensifying currency crisis in 1990’s

elsewhere.

India opened its stock markets to foreign investors in September 1992 and has,

since 1993, received considerable amount of portfolio investment from foreigners in the

form of Foreign Institutional Investments(FII) in equities. In order to trade in Indian

equity markets, foreign corporations need to register with the SEBI as Foreign

Institutional Investors (FII).

“SEBI’s definition of FIIs presently includes foreign pension

funds, mutual funds, charitable/endowment/university funds etc. as well as asset

management companies and other money managers operating on their behalf.”

The FIIs registered with SEBI come from as many as 28 countries (including money

management companies operating in India on behalf of foreign investors). It is, however,

instructive to bear in mind that these national affiliations do not necessarily mean that the

actual investor funds come from these particular countries. Given the significant financial

flows among the industrial countries, national affiliations are very rough indicators of the

‘home’ of the FII investments. In particular institutions operating from Luxembourg,

Cayman Islands or Channel Islands or even those based at Singapore or Hong Kong are

likely to be investing funds largely on behalf of residents in other countries. Nevertheless,

the regional breakdown of the FIIs does provide an idea of the relative importance of

different regions of the world in the FII flows.

INDEX

Serial

no.

Topic

Page no.

1

Introduction

1

2

Need for FII in Developing Countries

3

3

Who can be registered as FIIs

5

4

Entry options for Foreign Investors

6

5

Policy measures to attract FIIs

10

6

Reasons to invest in India

11

7

Legal aspects

13

8

Facilitation for Foreign Investment in India

15

9

Major determinants of FII flows

16

10

Benefits of FII

19

11

Prospects for Indian perspective

20

12

Positive attitude towards Foreign Investment

25

13

Major roadblocks in Foreign Investment

29

14

FII as portfolio investments

31

15

The Foreign investments & Sensex & Nifty

37

16

Daily trends in FII investments

44

17

SWOT Analysis

46

18

Conclusion

52

19

Recommendations

54

20

Annexure

Foreign Institutional Investments

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