Report

On ³FOREIGN INSTITUTIONAL INVESTORS´

Submitted To :
Bhawdeep singh kochar

Submitted By:
Sandeep Agarwal RT 1903 A-59 Reg. No.: 10907223 LIM (REPORTIER OF ADISH JAIN )

FOREIGN INSTITUTIONAL INVESTORS

1) Content.
y y y y y y y y y y y y How FII started in India? WHAT IS FII? WHO CAN BE REGISTERED AS AN FII? HOW TO APPLY The eligibility criteria for applicant Eligibility Where FII can invest? Pull Factors Taxation Why there is need of FII ? Impact Of FIIs On Indian Markets FII vs FDI

received portfolio investment from foreigners in the form of foreign institutional investment in equities. How FII started in India? FII (Foreign Institutional Investors) is used to denote an investor.2) Data. These investors must register with the Securities & Exchange Board of India (SEBI) to take part in the market. there were many terms and conditions which restricted many FIIs to invest in India. SEBI has simplified many terms such as: y y y The ceiling for overall investments of FIIs was increased 24% of the paid up capital of Indian company. But in the course of time. . and in 1993. it is mostly of the form of a institution or entity which invests money in the financial markets of a country. Initially. Corporate examples. The term FII is most commonly used in India to refer to companies that are established or incorporated outside India. in order to attract more investors. This has become one of the main channels of FII in India for foreigners. Allowed foreign individuals and hedge funds to directly register as FIIs. and is investing in the financial markets of India. History of FII India opened its stock market to foreign investors in September 1992. Investment in government securities was increased to US $ 5 Billion.

y y y y y y y y y y y y y Pension Funds Mutual Funds Investment Trust Insurance or reinsurance companies Endowment Funds University Funds Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf. One who propse to invest their proprietary funds or on behalf of "broad based" funds or of foreign corporates and individuals and belong to any of the undergiven categories can be registered for FII.WHAT IS FII? FII is nothing but Foreign Institutional Investors. Below entities are called FIIs. and Asset Management Companies Nominee Companies Institutional Portfolio Managers Trustees Power of Attorney Holders Bank .

A signed declaration statement that appears at the end of the Form. A declaration by the applicant with registration number and other particulars in support of its registration or regulation by a Securities Commission or Self Regulatory Organisation or any other appropriate regulatory authority with whom the applicant is registered in its home country. Registration with authorities. 1999 from the Reserve Bank of India. 1st Floor. Mumbai . A declaration by the applicant that it has entered into a custodian agreement with a domestic custodian together with particulatrs of the domestic custodian. INDIA. Declaration regarding fit & proper entity. provided that the period covered shall not be less than twelve months. Certified copy of the relevant clauses or articles of the Memorandum and Articles of Association or the agreement authorizing the applicant to invest on behalf of its clients Audited financial statements and annual reports for the last one year . is not adequate to qualify as Foreign Institutional Investor.WHO CAN BE REGISTERED AS AN FII? An application for registration has to be made in Form A. 'B' Wing. financial soundness.1995. The eligibility criteria for applicant seeking FII registration As per Regulation 6 of SEBI (FII) Regulations. Nariman Point. Mittal Court. experience. professional competence. The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act. Applicant must be legally permitted to invest in securities outside the country or its incorporation / establishment. Supporting documents required are y y y y y y y Application in Form A duly signed by the authorised signatory of the applicant. the format of which is provided in the SEBI(FII) Regulations. Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration: y y y y Applicant should have track record. general reputation of fairness and integrity. . 224. Address for application The Division Chief FII Division Securities and Exchange Board of India. 1995 and submitted with under mentioned documents in duplicate addressed 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. The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. which are responsible for incorporation.400 021.

and/or approval from home regulator. SEBI will issue a no-objection letter in this regard after recording the request of name change. The funds have to seek further investment limit in case the limit allotted to them is exhausted and they wish to invest further. Payment of registration fee of US $ 5. The procedure for registration of FII/sub account under 100% debt route is similar to that of normal funds besides a clear statement by the applicant that it wishes to be registered as FII/sub account under 100% debt route. However. Certificate from the Registrar of Companies.00 Annexure B of the Regulations duly filled and signed by the FII and Sub-Account has to be submitted by FII on behalf of the proposed sub-account. . With if DD of US$ 1000 favouring "Securities and Exchange Board of India" as fees is to be submitted payable at New York. The applicant has to appoint a local custodian and enter into an agreement with the custodian.y y y The applicant must be a "fit and proper" person. For registered Foreign Institutional Investor.000. Government of India allocates the overall investment limit for 100% debt funds annually. Original Registration Certificate issued by SEBI to the Foreign Institutional Investor. The relevant documents are : y y y Request for change in name by the Foreign Institutional Investor mentioning reasons for name change of the FII and/or sub account. The grant of investment limit for individual 100% debt funds is within this overall limit. The information regarding name change should be submitted immediately after the change has taken place in the home country and the requisite approval from the home regulator (if needed) has to been taken. it has to inform SEBI promptly with the relevant documents supporting the name change. Besides it also has to appoint a designated bank to route its transactions.

No single entity would be allowed to invest more than Rs 2. ports and power plants. The time period for utilisation of corporate debt limits.000 crore and the minimum amount. which can be invested. FII investment limits stands at $10 billion in government bonds and $20 billion in corporate bonds. . The bidding process for the revised limits will begin from December 2 on BSE. FIIs can invest in corporate bonds of infrastructure companies with residual maturity of five years. will be Rs 200 crore. But the time period for utilisation of corporate debt allocated on first-come-first serve basis. The announcement appears to have been timed well since it came on a day when the borrowing calendar for the second half was unveiled. The finance ministry revised the cap for investment by foreign portfolio investors in government securities from $5 billion to $10 billion. Following this. In September. The government has raised the ceiling for investment in government and corporate bonds by foreign funds. FIIs can invest in debt papers of only select infra cos Sebi on Friday said overseas portfolio investors can invest in the debt instruments of only those infrastructure companies as defined by the external commercial borrowing policy. after the bidding process. and in corporate bonds from $15 billion to $20 billion.Where FII can invest? FIIs can invest $10 billion more in bonds now. which will ease pressure on banks to raise rates with rising demand for loans to build roads. the government increased the limit of FII investment in government debt as well as corporate debt by $5 billion. the Sebi circular said. has been fixed at 22 days for corporate debt and 11 days for government securities. has been fixed at 90 days and for the government debt at 45 days. which led to yields easing. allocated through bidding process. with the minimum tick size being Rs 100 crore.

The cut-off point. the Reserve Bank cautions all designated bank branches so as not to purchase any more equity shares of the respective company on behalf of FIIs/NRIs/PIOs without prior approval of the Reserve Bank. and Persons of Indian Origin (PIOs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS).the investment made on repatriation basis by any single NRI/PIO in the equity shares and convertible debentures not exceeding five per cent of the paid up equity capital of the company or five per cent of the total paid up value of each series of convertible debentures issued by the company. Once the aggregate net purchases of equity shares of the company by FIIs/NRIs/PIOs reach the cut-off point. and . FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India. for instance. The ceiling for FIIs is independent of the ceiling of 10/24 per cent for NRIs/PIOs. Similarly. the cut-off limit for public sector banks (including State Bank of India) is 18 per cent. The link offices are then required . Monitoring Foreign Investments The Reserve Bank of India monitors the ceilings on FII/NRI/PIO investments in Indian companies on a daily basis. And the ceiling of 10 per cent for NRIs/PIOs can be raised to 24 per cent subject to the approval of the general body of the company passing a resolution to that effect. which is 2% below the overall limit. subject to the approval of the board and the general body of the company passing a special resolution to that effect. the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. Under this scheme. The ceiling of 24 per cent for FII investment can be raised up to sectoral cap/statutory ceiling. is fixed at 8 per cent for companies in which NRIs/ PIOs can invest up to 10 per cent of the company's paid up capital. is 28 per cent and so on. on repatriation and non-repatriation basis. The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the Indian company and 10 per cent for NRIs/PIOs. For effective monitoring of foreign investment ceiling limits.the total purchase of all NRIs/PIOs both. The equity shares and convertible debentures of the companies within the prescribed ceilings are available for purchase under PIS subject to: . Non-Resident Indians (NRIs). including the State Bank of India.By Regulations Foreign Institutional Investors (FIIs). The cut-off limit for companies with 24 per cent ceiling is 22 per cent and for companies with 30 per cent ceiling. being within an overall ceiling limit of (a) 24 per cent of the company's total paid up equity capital and (b) 24 per cent of the total paid up value of each series of convertible debenture. The limit is 20 per cent of the paid up capital in the case of public sector banks.

the Reserve Bank gives clearances on a first-come-first served basis till such investments in companies reach 10 / 24 / 30 / 40/ 49 per cent limit or the sectoral caps/statutory ceilings as applicable. The Reserve Bank also informs the general public about the `caution¶ and the `stop purchase¶ in these companies through a press release. market liquidity. the Reserve Bank advises all designated bank branches to stop purchases on behalf of their FIIs/NRIs/PIOs clients. Higher Interest Rates. size. On receipt of such proposals. information dissemination External Push factors : Global liquidity.to intimate the Reserve Bank about the total number and value of equity shares/convertible debentures of the company they propose to buy on behalf of FIIs/NRIs/PIOs. low trading cost. strong economic fundamentals. Pull Factors Domestic Pull factors . On reaching the aggregate ceiling limit. higher risk appetite. lower interest rates.Reforms. good valuations. lower relative growth .

transactions in equity shares and derivatives (both stock and index-linked) effected on a recognised stock exchange and redemption of units of equity-oriented mutual funds are subject to a securities transaction tax (STT) at prescribed rates.10% Short-term capital gains .10 % (earlier taxed at 30% for FIIs) Gains. FIIs have offered their income from transactions in Indian securities to tax as capital gains under the tax regime prescribed for FIIs under section 115AD of the Income-tax Act. A special and concessional tax regime was introduced for the taxation of income earned by FIIs to make the markets lucrative for such investors. Under the new tax regime.oriented funds chargeable to STT are taxed as under: Long-term capital gains . With the increasing number of FIIs dominating the capital markets and a sizeable portion of foreign investment coming in through FIIs.Exempt (earlier taxed at 10% for FIIs) Short-term capital gains . capital gains made by FIIs were taxed at the base tax rates mentioned below: Long-term capital gains . The above capital gains tax rates are subject to relief that may be available to an FII under tax treaties that India has entered into with other countries where the FII is a tax resident. This article discusses the FII tax regime and some tax issues confronting FIIs. Special Tax Regime Gains made from investments in Indian securities are the primary and most significant item of income for FIIs. 1961 (Act). debt securities. in respect of transactions in equity shares (which are not effected on a recognised stock exchange). . non-equity oriented funds and derivatives (though transactions in derivatives are subject to STT) continue to be subject to tax at the rates mentioned in the Special tax regime (see above).30% Gains characterised as business profits . their taxation in India has assumed considerable significance. if any. capital gains earned from transactions in equity shares and units of equity.FII Taxation: The liberalisation of the Indian economy and the opening up of the capital markets to foreign investors in 1992 created a new class of investors ± foreign institutional investors (FIIs). Historically.40% for corporate entities (30% for non-corporate entities) Current tax regime A new regime of taxing capital gains was introduced in October 2004. Under the special tax regime. Under this regime.

In arriving at the said conclusion. While this would have a positive impact for FIIs investing from a jurisdiction with which India has a tax treaty (since gains would be exempt from tax in the absence of a PE). In a recent ruling. . in an instruction issued in 1989. The instructions. most FIIs have been offering gains from transfer of securities to tax as capital gains . However.Characterisation of gains earned from investments There has always been ambiguity in respect of characterisation of income earned by FIIs on transfer of securities as capital gains or business income. the AAR was guided. by: the enormity and frequency of transactions the motive of the FII to earn profits (rather than earn dividend income) from purchase and sale of shares. The Central Board of Direct Taxes (CBDT). could have far reaching implications. laid down certain tests to distinguish between shares held as stock-in-trade and shares held as investment. the income of FIIs were held to be not taxable in India under the provisions of the applicable tax treaty. inter alia. Based on the facts of specific cases. The instructions reiterate the principles laid down in several judicial cases dealing with the characterisation of income. Historically. several rulings by the Indian Authority for Advance Ruling (AAR) examined the characterisation of income arising on transfer of securities in the case of FIIs. CBDT now proposes to issue supplementary instructions (though not specifically in the context of FIIs) to provide further guidelines to assist the revenue authorities determine whether a tax-payer is a trader in shares or an investor in shares. AAR held in the case of a UK-based FII that income from purchase and sale of derivative contracts constitutes business income and is not taxable in India in the absence of a PE in India. relying on the principles laid out in the proposed CBDT instructions and the judicial precedents. on the basis that FIIs did not have a permanent establishment (PE) in India. A similar issue would arise in case of gains from transactions in derivatives in India given that there has always been an ambiguity on whether the income from derivatives would constitute business income or capital gains in the absence of a specific code of taxation. it would have a significant negative impact for FIIs that do not have recourse to tax treaty protection. which apply to all categories of tax-payers (including FIIs unless specifically excluded by the CBDT while issuing the final instructions). It is possible that the revenue authorities. may seek to treat income earned from the sale of securities as business profits. AAR ruled that the securities held by FIIs constituted their business assets and the resultant gains constituted business profits.a position that has also been accepted by the revenue authorities. Further.

However. in October 2003.This is due to the fact that under domestic tax law. the revenue authorities accepted the tax return filings made by such FIIs without examining the substance of the formation of such investment vehicles. However. The Delhi HC quashed the notice. that the notice breached the powers conferred on the revenue authorities by the domestic tax law. FIIs that are tax residents in Mauritius are entitled to the beneficial provisions of the India-Mauritius tax treaty where a tax residence certificate is issued by the Mauritius revenue authorities. Subsequently. business profits earned by a non-resident are presently taxable at a rate of 40% (30% in case of non-corporate entities) on net profits (revenues less permissible expenses). holding. maintenance of books of accounts. the efficacy of structuring investments in India by involving an investment vehicle domiciled in Mauritius has significantly reduced though it continues to be employed by several foreign investors investing in the Indian capital markets. passed an order setting aside the decision of the Delhi HC and declared the notice to be valid and efficacious. requirement to furnish a tax audit report to name a few). For many years. With the reduction in tax rates of capital gains (see Current tax regime). many FIIs investing in India have structured their investments into India involving an investment vehicle domiciled in Mauritius. inter alia. based on the current tax provisions. A non-governmental organisation (Azadi Bachao Andolan) filed a public interest litigation petition in the Delhi High Court challenging the validity of the above notice. the above basis of taxation could particularly trigger a host of compliance and documentation-related issues for FIIs (such as tax withholding. Thus. issued a notice clarifying that FIIs holding a tax residence certificate issued by the Mauritius revenue authorities would be regarded as tax residents of Mauritius and the beneficial owner of income earned from India. . The central government appealed against the decision of the Delhi HC before the Supreme Court (SC). Developments under the India-Mauritius tax treaty Given the beneficial provisions for taxation of capital gains under the India-Mauritius tax treaty and the favourable regime for regulation and taxation of offshore funds in Mauritius. the revenue authorities. resulting in increased cost of investment for the FIIs. The SC. CBDT (the apex Indian tax administrative body). denied some FIIs the benefits gained under the India-Mauritius tax treaty on the basis that such FIIs were neither tax residents of Mauritius nor the beneficial owner of the income earned from Indian investments. while auditing tax returns filed by various Mauritius-based FIIs in 2000.

However. Therefore. When the matter came up for hearing before the special bench of the Income Tax Appellate Tribunal. coupled with the India growth story. . It was the revenue authorities¶ contention that since the short-term and long-term capital gains were taxed at differential tax rates (30% and 10%. would certainly be very welcome. they are to be regarded as distinct sources of income. The above judgment comes as a great relief to FIIs that have been keenly awaiting the outcome of this case before the special bench. a tax payer was required to set-off the capital losses incurred during the year (on transfer of short-term and long-term capital assets) against capital gains earned during the year in the manner prescribed under the Act. the Act permitted a tax payer to setoff losses from one source against income from another source under the same head of income (the Act was amended effective April 1. Up to (and including) financial year ended March 31. 2002. respectively). has given the much-needed impetus to FII investments in the Indian capital markets. including characterisation of income. However. 2002 restricting the manner of set-off of long-term capital losses). it is the legitimate right of the tax payer to choose the option that is more favourable to it so that it could avail the benefit of the concessional rate of tax on long-term capital gains.Manner of set-off of capital losses Another issue faced by FIIs is the manner of set-off of capital losses incurred prior to April 1. The reduction in tax rates. Proactive clarifications in the future from CBDT on contentious issues. where the net result of the set-off resulted in a capital gain. certainty and clarity in tax matters is critical to retain the attractiveness of India as an investment destination. With the matter now having been settled. Where the net result of the above set-off was a capital loss. Mumbai (ITAT) [a 3-member bench constituted to decide on the matter]. the bench held that since the Act had not prescribed any order of precedence according to which the loss arising from one source has to be set-off against income from any other source. 2002. The above manner of set-off was not accepted by the revenue authorities. the tax payer could utilise the capital losses for past years brought forward. to set-off the net capital gains of that year. the tax payer was permitted to carry forward this loss to be set-off against capital gains earned in eight subsequent years. if any. a number of cases pending with ITAT and at lower levels with taxes running into millions of rupees locked in as a result of the litigation on this issue are expected to be favourably decided.

Why there is need of FII ? .

Demat settlements have eliminated bad deliveries and other related problems associated with physical. they exited the scrips and booked profits. which used to be counter force for FIIs has ceased to play that role in the Indian stock markets. the stock trading activity has concentrated to these liquid scrips making them less liquid scrips totally illiquid. this is benefiting domestic investors also. . FIIs are the trendsetters in any market. Rolling settlement was introduced at the insistence of FIIs as they were uncomfortable with the badla system. Equity research was something unheard of in the Indian market a decade ago. It was FII which based the pressure on the rupee from the balance of payments position and lowered the cost of capital to Indian business. It is due to the FIIs that a concept like corporate governance is being increasingly adopted by Indian companies. Today financial institutions and mutual funds including UTI can do little to help the stock markets at a time of crisis. They were the first ones to identify the potential of Indian technology stocks. Even UTI.Need Of FIIs On Indian Markets It is influence of the FIIs which changed the face of the Indian stock markets. FIIs have become the driving force behind the movements of the stock indices on the Indian stock markets. With their massive financial muscle FIIs have almost replaced conventional market of the Indian bourse. traded and settled in demat form. the activity in stocks used to be evenly attributed with little differences between volumes in specified and cash groups. The major beneficiaries of the rolling settlement system are FIIs as short settlement cycles offer them quick exit from the market. Two depositories have come into existence ± NSDL and CSDL. Thus. Depositories: The increase in the volume of activity on stock exchanges with the advent of on screen trading coupled with operational inefficiencies of the former settlement and clearing system led to the emergence of a new system called the depository System. Before the arrival of FIIs. All securities are held. However since FIIs concentrate on the top 200 companies against the 6. Screen based trading and depository are realities today largely because of FIIs.000 listed companies on BSE. SEBI mandated compulsory adding and settlement of select securities in dematerialized form. It is expected that with the adoption of international practices such as rolling settlement and derivatives FII participation will increase and more money will flow into the Indian capital market. When the rest of the investors invested in these scrips.

They can be revived by reissuing them at a later date or for employee option. The company has the option to either cancel them or hold them as treasury ± frozen stock. A company intending to improve market quotes of its scrips may choose buy back rather than pay higher dividends as buy back signals management confidence. For a company facing a threat of hostile takeover share buy back would help its promoters to increase their proportional share holding in the company. acquisitions and takeovers/ 2. If the shares are cancelled the equity base of the company will be reduced by Rs10 crore. A company may think of altering its capital structure if its equity is disproportionately large. If the repurchased shares are held as treasury stock. which it had issued previously to the shareholders. though technical is significant.Buy Back of shares: Buy back of shares means that a company purchases or buys back its own shares. while the reserves will be depleted by Rs 90 crore. For example a company buys back one crore equity shares of the face value of Rs 10 at Rs 100 each. buy back provides an exit route to investors in case of illiquid scrips . Buy back may help the company to achieve a target capital structure. the shares will not be extinguish. A company with surplus cash to invest and buy may consider it to be a worthwhile invest proposition as it carries minimum risk compared with other avenues of investment such as investment in new projects. The differences. but will be held neither as an investments nor as equity. A company may be motivated to buy back its own shares for any of the following reasons: 1. A panic driven fall in share prices can be arrested through buy back of shares. 3. 4. Moreover. 5. development of new products.

and . The market is segregated between resident and non-resident investors and there are strict controls. such as infrastructure bottlenecks. Open up the real sector and investments will flow. What explains the greater attraction of the Indian market for portfolio investors as compared to foreign direct investment (FDI)? In his column µBullish FII versus cautious FDI¶ in these pages (FE. Senthil Chengalvarayan has compared the Indian scenario. Archaic labour laws. February 14). preceded by a fairly perfunctory due diligence. It¶s just the reverse in China. such as the Industrial Disputes Act. Part of the reason is that equity markets are far less open than in India. Even in sectors opened to FDI on paper. Projects for electricity generation.5 billion last year and have already exceeded $1 billion in the current year to date. there is another factor that¶s just as critical. There are also a number of practical hurdles. is all it takes before an FII can enter the Indian stock market and commence trading. characterised by strong portfolio inflows and much weaker foreign direct investment (FDI). all of which make entry difficult. While his broad thrust is correct.FII Vs FDI FIIs can purchase and sell Government Securities and Treasury Bills within overall approved debt ceilings. We would say open up and. Several measures to boost FDI have been announced in 1998-99. transmission and distribution as also roads and highways. authorised dealers have been permitted to provide forward cover to FIIs in respect of their fresh equity investments in India. There are innumerable clearances that need to be obtained at the state and district levels. FDI is in the range of $50 billion. he argues. FII flows topped $8. if not more. problems remain at the grassroots. where the situation is the reverse. Exit is equally simple FDI. Also. both entry and exit are far more difficult. Ease of entry and exit. while portfolio flows are much lower. Given that FDI is far more beneficial to the recipient country than FII. the big question troubling Indian policymakers is how do we replicate the Chinese example. Bankruptcy laws are convoluted and legal processes costly and long-winded. it is relatively effortless for a foreign institutional investor (FII) to enter the capital market. To facilitate better risk management by investors. ports and harbours. equally. make exit easier as well. prohibit the closure of any company employing more than 100 workers without obtaining prior state government permission. 100 percent FII debt funds have been permitted to invest in unlisted debt securities of Indian companies. In contrast. Exit is more complicated. Moreover. with China. however. Today. FDI flows have remained stuck in the $3-4 billion groove for the past many years. transactions among FIIs with respect to Indian stocks will no longer require post-facto confirmation from the RBI. No wonder portfolio inflows into India far exceed direct investment flows. A Sebi registration. in the range of $4-5 billion. He attributes the difference to the opening of the capital market.

FDI permissible under Non-Banking Financial Services now includes "Credit Card Business" and "Money Changing Business". All end-use restrictions on GDR/ADR issue proceeds have been removed.$ 2. 1500 crore. On the other hand.696 million in 1996-97 to U. International developments continue to affect capital flows into India in 1998-99 as well. GDR/ADR guidelines have been further liberalised in 1998-99.S.S.6 per cent from U.$ 880 million during April-December.025 million compared to U. The 90-day validity period for final approvals of GDR/ADR issues has been withdrawn and final approval will continue to be valid.$ 149 billion in 1997 from U. subject to license. This decline in portfolio investment is mainly attributable to the contagion from the East Asian crisis.7 per cent in 1996. 1998 as against an inflow of U.S. except the prevailing restrictions on investment in stock markets and real estate. The provisional estimate of total foreign investment at U. Although FDI flows were weaker.vehicular tunnels and bridges have been permitted foreign equity participation up to 100 per cent under the automatic route.312 million in 1996-97 to U.2 per cent in 1997. India¶s share of global FDI flows rose from 1. Also. minimum capitalisation norms earlier required for pure financial consultancy services have been relaxed. Unlisted companies are now permitted to float Euro issues under certain conditions. 1998 was sharply lower compared to the inflow of U. in companies providing Global Mobile Personal Communication by Satellite (GMPCS) services.828 million in 1997. Regarding equity participation in private sector banks.$ 1. The companies.S.S. multilateral financial institutions have been allowed to contribute equity to the extent of the shortfall in NRI holdings within the overall permissible limit of 40 per cent. India¶s share in net portfolio investment flows to the developing countries declined to 5. however.S.$ 4253 million during the corresponding period in the previous year.S. The Government has also decided to permit FDI up to 49 per cent of the total equity.S. Foreign Direct Investment (FDI) inflows to developing countries are estimated to have gone up to U.S. Indian companies are now permitted to issue GDRs/ADRs in the case of Bonus or Rights issue of shares. or on genuine business reorganisations duly approved by the High Court.197 million in 1997. this overall decline in capital flows was mainly attributable to a net outflow in portfolio investment of U.S. FDI in India in 1997-98 was lower at U. which adversely affected capital flows to all emerging markets.8 per cent in 1996 to 2.98.$ 5.$ 1742 million during the same period .9). Although foreign direct investment (FDI) increased by 18.$ 3.$ 682 million during April-December. provided foreign equity does not exceed Rs. thereby imparting greater flexibility to issuing companies regarding the timing of issues.$ 3.S. in all such cases. portfolio investment declined from U. will be required to get approval from the Department of Economic Affairs for the issue of GDRs/ADRs.$ 130 billion in 1996.1 per cent in 1997 after increasing to 8.98.008 million in 1996-97 because of a decline in portfolio investment (Table 6.S.$ 6.

was the dominant source of FDI inflows in 1997.$ 6. Korea increased its flow of investment in India from a meagre U.S. The striking feature was that S.3 million in 1996-97 (0.1 million in 1997-98 (10.$ 333. the second and third largest sources of FDI. as in the previous two years.S.98. .S. and S. Mauritius.in 1997.2 per cent of total FDI) to U. U.4 per cent share).A. Trends in approvals and actual inflows of foreign direct investment are shown in Table 1 below. Korea were. respectively.

follow-on overseas offers. BY: Muhammed Haris | Category: Business and Finance | Post Date: 2009-09-05 Huge investments are being done by FII (Foreign Institutional Investors) in Indian companies. 4). must receive approval from SEBI before they can commence trading in India. There are 4 ways for an FII to access the India market. Pranab Mukherjee said that no restrictions will be imposed on FII investments in India. India's finance minister Mr. Do they lack the knowledge about poverty and social issues in India? Does India has a false image in International market? 3). 2009 ABSTRACT: The FII inflows into the primary market in India comes mainly through the conversion of foreign currency convertible bonds (FCCBs). As of 03 April.48 billion in Indian stocks this year.If India is a developing country. The other. 2007. I am not thinking of putting a cap on FIIs (investment in the equity market) .FII INFLOWS IN INDIA ³PREFERENTIAL ALLOTMENT OF SHARES´ By Pankaj Kumar Posted: Sep 17. the Forward Markets Commission (FMC) oversees futures on physical commodities where SEBI administers financial products. But the question is .No Restrictions Imposed on FII Investments in India . 1). The main reason to have enforced this stand out decision seems to be the record $24. It's worth noting the fact that India is the only country to enhance FII investment limits in debt this year while other developing economies like while Brazil and Japan have moved to limit inflows. why do they rely on our services and invest in India. initial public offers (IPOs).Indian Stock Market Going Strong posted on 28th Oct 2010 ABSTRACT: Inaugurating the two-day Economic Editors' Conference in New Delhi. 4 Ways To Trade India By Stephen Edge : The Securities and Exchange Board of India (SEBI) is one of two regulators of India's derivatives market. there were 996 Foreign Institutional Investors (FII) directly registered with SEBI. Honourable minister stated At this time. 2). private placement to qualified institutions placements (QIPs).Why are Foreign Institutional Investors (FII) investing in India. FIIs. . in most cases.Review of literature. SEBI is an independent agency created in 1992 and is a department in the Ministry of Consumer Affairs Food and Public Distribution. conversion of warrants and preferential offers.

The.5). As a result of this the. Bloomberg data show. .700 crore). 12 per cent and 3 per cent.Malvika Sampat . ABSTRACT: Foreign fund managers are on a "Quit India" mission this year. South Korea. 20 per cent and 11 per cent from 29 per cent. 2011 . 6). FIIs suck out record $600 m in a day [India Business] Times of India. On Thursday alone. The share of FII inflows for the week-till-date for these countries has increased to 34 per cent. FIIs inflow reduce in India December 7th. 2010 BY. the FII inflow in India has been reduced to 35 percent from 50 percent in the yeartill-date to 35 per cent in the week-till-date. they said. this figure is expected to rise. Feb 26. so far in 2011. the same group of investors has taken out over $3.5 billion from the secondary market. After pumping in over $29 billion into the Indian stock market last year. the benchmark indices could slide further from the current levels. As a result. Taiwan and Thailand have gained at India¶s expense. FIIs pulled out $600 million (Rs 2. And going by what institutional dealers say about the current mindset of FII fund managers. ABSTRACT: It is reported in the Financial Express that the investments form the foreign institutional investors (FIIs) have reduced in India. reaching multi-year lows. respectively.

due to global financial crisis the investments by FIIs were reduced. The foreign institutional investment was increased during the years 2009 and 2010. next only to China. Though. FIIs investment and BSE & NSE indices. However. Likewise we have received aid from Russia. Britain and Germany for establishing Bhiloy. While planning to start the steel companies under government control. Indian economy has experienced the problem of capital in many instances. As we know the need for Foreign capital arises due to shortage from domestic side and other reasons. revealing that the liquidity and volatility was highly influenced by FIIs flows. The present paper is a modest attempt to study the trends in Foreign Institutional Investment into India. it is also proved that FIIs investment was a significant factor for high liquidity and volatility in the capital market prices. Rourkela and Durgapur steel plants. It is observed that the FIIs investment has shown significant improvement in the liquidity of stock prices of both BSE and NSE. these countries have developed a strong urge for industrialization and economic development. due to shortage of resources it has taken the aid of foreign countries. The present study is a modest attempt to know the status of FIIs in Indian capital market. Britain and Germany for establishing Bhiloy.Findings. India now ranks 10th among the largest economies in the world (World Bank Report). there is a high degree of positive co-efficient of correlation between FIIs investment and market capitalization. Rourkela and Durgapur steel plants. According to the strong growth rate of GDP. despite this shortage of investment. Later on. Further. . Indian economy has experienced the problem of capital in many instances. The Indian economy has been one of the fastest growing economies in the world. While planning to start the steel companies under government control. Likewise we have received aid from Russia. due to shortage of resources it has taken the aid of foreign countries. Most of the under developed countries suffer from low level of income and capital accumulation.

com/regulatory-compliance-articles/fii-inflows-in-india1242465.moneycontrol.indiatimes.articlesbase.org.com .in  www.html#ixzz1HaXw0OGB  www.timesofindia.org  www.rbi.com  www.business-standard.BIBLIOGRAPHY  http://www.com  articles.ibef.

Sign up to vote on this title
UsefulNot useful