FII in India Presented by: Ishfaq Shah

Foreign Institutional Investment(FII) } An institution that is a legal entity established or incorporated outside India proposing to make investments in India only in securities. -SEBI Its category of investment instruments that are more easily traded and do not represent a contr olling stake in an enterprise _ investment via equity instrument (stocks) debt (bonds) of a foreign enterprise w hich does not necessarily represents a long term interest. }

CATEGORIES OF FII s } BANKS } INSURANCE COMPANIES } PENSION FUNDS } HEDGE FUNDS } MUTUAL FUNDS } ASS ET MANAGEMENT COMPANIES } INSTITUTIONAL PORTFOLIO MANAGERS } TRUSTEES } POWER OF ATTORNEY HOLDERS

REASONS INDIA ATTRACTS FII s } } } } } } } } Robust domestic growth story 2nd largest emerging market 4th largest economy Inc reasing number of skilled labour Cost competitiveness Strong macro-economic fund amentals of companies Transparent regulatory system Lists 6500 companies on BSE

CATEGORIES OF REGISTERED FII s } Regular FIIs: not less than 70 per cent in equity related instruments 30 per cent in non-equit y instruments. } 100 per cent debt-fund FIIs: permitted to invest only in debt instruments.

Where do FII s invest? } Securities in primary markets and secondary markets } Units issued by domestic mutual funds } Dated/Fixed government securit ies } Derivatives } Debt instruments

FII Portfolio

Past trend

Cycle of growth

Advantages } } } } } } } } Enhanced flows of equity capital Helps improve capital structures and contribute s towards building the investment gap Managing uncertainty and controlling risks FII inflows help in financial innovation and development of hedging instruments FIIs enhance competition and efficiency of financial markets Equity market deve lopment aids economic development FIIs constitute professional financial analyst s, who contribute to better understanding of firms operations Improve corporate governance

Disadvantages } Impact on small investors } Impact on exporters } Short term investment tenden cy } Problems of Inflation. } Reduces flexibility of policymakers } Hot Money } False representation of economy } Cannot be utilized for long term

Regulating Agencies } RBI the apex bank } FIPB reviews all foreign investment proposals } SEBI which regulates India's capital markets

Factor Meaning Type FDI FII Description FDI vs FII If any foreign entity or investor obtains or acquires the controlling interest I f any foreign investor invests in the stocks of a domestic company Diversificati on and expansion at global coverage Sole criteria and motive is to gain on inves tment Long period Short period MNC s and corporate so as to derive benefit of ne w market , cheaper resource , efficiency and skill etc. Individual investor, mut ual fund company, portfolio management and corporate with pure motive of investm ent gains. FDI generally comes as subsidiary company or joint venture It comes t hrough stock market RBI , ministry of finance and FIPB( Foreign Investment Promo tion Board ) SEBI ( Security Exchange Board Of India ) Purpose FDI FII Duration FDI FII Source FDI FII Form FDI FII Regulator Body FDI FII

FIIs are raising stakes } } FIIs are rebuilding their portfolio after emerging from the global crisis They h ad sold Indian stocks and took money out to meet redemption pressure in their ho me countries IMPLICATIONS: } FII inflows are expected to grow } Investors optimism and ROI ex pected to increase } Almost 2/3 of the companies have reported increase in FII i nvestments

THANK YOU Any Questions???