 Foreign Institutional Investors are defined under SEBI

Regulations as “an institution that is a legal entity

established or incorporated outside India proposing to
make investments in India only in securities.”
 Foreign Institutional Investor (FII) is used to denote an
investor - mostly of the form of an institution or entity,
which invests money in the financial markets of a country
different from the one where in the institution or entity was
originally incorporated.
 FII investment is frequently referred to as hot money for
the reason that it can leave the country at the same speed at
which it comes in.
 India opened its stock market to foreign investors
in September 1992, and in 1993, received
portfolio investment from foreigners in the form
of foreign institutional investment in equities.
 We often hear the terms "FIIs Fuel the Market
Run".
 As per Regulation 6 of SEBI (FII) Regulations,
1995, Foreign Institutional Investors are required
to fulfil the following conditions to qualify for
grant of registration
 The applicant is required to have the permission
under the provisions of the Foreign Exchange
Management Act, 1999 from the Reserve Bank of
India.
 Payment of registration fee of US $ 5,000.00
 A FII can make investments only in the following types of securities
 Securities in the primary and secondary markets including shares,
debentures and
 warrants of unlisted , to- be-listed companies or companies listed on a
recognized
 stock exchange
 Units of schemes floated by domestic mutual funds including Unit
Trust of India,whether listed on a recognized stock exchange or not,
and units of scheme floated by a Collective Investment Scheme.
 Government Securities
 Derivatives traded on a recognized stock exchange – like futures and
options. FIIs can now invest in interest rate futures that were launched
at the National Stock Exchange (NSE) on 31st August, 2009.
 Commercial paper
 The FII shall restrict allocation of its total investment
between equities and debt including dated Government
Securities and Treasury Bills in the Indian Capital Market in
the ratio of 70:30, with a cap of USD 200 million in
Government securities.
 The FII can also form a 100% Debt Fund and get registered
with SEBI for investment in debt investments. Investment in
debt securities by FIIs are subject to limits, if any, stipulated
by SEBI in this regard. FII Cap in debt is at present at USD
2.25 billion in the domestic market, including a limit of USD
500 million in corporate debt.
 Enhanced flows of equity capital.
 FIIs have a greater appetite for equity than debt in
their asset structure.
 FII inflows help in financial innovation and
development of hedging instruments.
 Improving capital markets.
 FIIs as professional bodies of asset managers and
financial analysts enhance competition and
efficiency of financial markets.
 Problems of Inflation.
 Problems for small investor.
 Adverse impact on Exports.
 Hot Money: "Hot money" refers to funds that are
controlled by investors who actively seek short-
term returns.
 US-based foreign institutional investors (FIIs) had
net investments of about US$ 4.46 billion in the
Indian markets, as compared with US$ 702.37
million in 2006. These countries are further
followed by France, Mauritius and the UK.
 According to data released by the market regulator
(SEBI), FIIs transferred a record US$ 17.46 billion
in domestic equities during the calendar year 2009
which previous high of US$ 14.96 billion by foreign
fund houses in domestic equities in 2007.
 FII net inflows: $10.7 billion in 2005, $9.2 billion in 2004 and $ 6.6
billion in 2003. Total net inflow since 1993: $42 billion in a total
market cap of $ 550 billion.
 Investments through three routes: registered FII, registered as a sub-
account of a sponsoring FII, and indirectly through access products
or Participatory Notes (PNs).
 Estimated 90% investment through sub-accounts, as this avoids
procedural problems: establishing broker and custodian relationships,
filing of tax certificates, etc. PNs account for about 25% of total FII
investment, including sub-accounts.
 PNs are derivative products wherein the holder gets all the economic
benefits of a direct exposure to Indian equities with a corresponding
exposure that the FII/sub-account would take on the underlying
equities in the Indian market. Since February 2004, PNs can be
issued only to regulated entities.
 The trend of strong FII inflows of about US$ 6.3
billion during April-June quarter gained further
during the September quarter of current fiscal with
an infusion of US$ 7.2 billion.

 During the October-December period in 2009-10,

FIIs made a investment on shares of worth US$ 5.19
billion.
 The number of registered FIIs stood at 1706 and
number of registered sub-accounts rose to 5,331 as of
December 31, 2009.
 ‘FIIs aren’t turning negative on India’
(Sunday, Jun 28, 2009)
 FII control (Wednesday, Aug 19, 2009)

 SEBI cuts FII limit in gilts to Rs 800 cr from

Rs 1,000 crore(Saturday, Sep 05, 2009)
THANK YOU…

Presented by:
Gurpal Singh
Regd:10800426
Roll.no: R 1809-A18