The objective of this presentation is To study & analyze strategies adopted by foreign Investors while investing in various market

t conditions. To analyze various rules framed by the home country with respect to Foreign Investments.

Foreign Investment - Definition

Overview

Liberalization Privatization Globalization Impact of LPG

WHAT IS FDI AIM OF FDI WHY WE NEED FDI

Requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB) A foreign investing company is entitled to acquire the shares of an Indian company without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines. If the acquisition of shares directly or indirectly results in the acquisition of a company listed on the stock exchange, it would require the approval of the Security Exchange Board of India. A foreign investor with an existing venture or collaboration (technical and financial) with an Indian partner in particular field proposes to invest in another area, such type of additional investment is subject to a prior approval from the FIPB, wherein both the parties are required to participate to demonstrate that the new venture does not prejudice the old one.

Banking (Private Sector) 74% Atomic Minerals 74% Defense production 26 % Retail 51%

Fully permitted Activities  Cigar and cigarettes of tobacco  Coal, Roads & Highways  Diamond, Gold, Silver , Minerals  Atomic minerals  Electricity  Hotel, hospitals

     

Prohibited activities Atomic energy Arms and ammunition Lottery business Betting and Gambling Aircraft and warships Coal lignite

USA $228BN CHINA $106 BN HONGKONG $69 BN BELGIUM $62 BN BRAZIL $48 BN

Political Considerations Infrastructure Government Policies Labor Laws Corruption & Bureaucracy

Opening of stock market Sept 1992 FPI started in 1993 Definition Registration with SEBI How to Apply- Form A provided by SEBI Regulation Act, 1992 Eligibility Criteria s Till Now FII Registered as on 5th August 2011 =1738 No of Sub-Accounts Registered 5958

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, and Asset Management Companies Nominee Companies Institutional Portfolio Managers Trustees Power of Attorney Holders Bank

Current financial instruments are available for FII investments shares debentures Units of mutual funds; Dated Government Securities; Derivatives traded on a recognized stock exchange ; Commercial papers

 No more than 10% of the equity in any one  

 

company No more than 10% in the equity in any one company on behalf of a fund sub-account No more than 5% in the equity in any one company on behalf of a corporate/individual sub-account No more than 24% in the aggregate of the total issued capital of a company to be held by FIIs Companies where ceiling have Reached and no further purchases(w.e.f.14.2.2011) are Pantaloons Retail, Panyam Chemicals and Nirlon Ltd

Research and Current statistics

01/08/2011 02/08/2011 03/08/2011 04/08/2011 05/08/2011 08/08/2011 09/08/2011 Net Inflows 157.2 -82.7 -801.1 -146.7 -1609.6 -1109.7 -4211.5 -7804.1

Pre Result Buying by FII s

Daily Average of Net Purchases by FII in 2011 100cr But Buying of Average 1000 Cr Before Quarterly Results These pattern been followed for last 8 Quarters (with 2 exceptions when Quarterly results were bad and FII turned negative)

Net FII inflows in 2011 as on 9th August,2011= 6489 Cr

Advantages Of FII

Increases Forex reserves Increases domestic investments Economy development

Disadvantages Of FII

Problem of inflation Problem for small investors Adverse impact on exports

ADVANTAGES OF FDI

Employment opportunities increases Government income is also increased Less reliability on imports

DISADVANTAGES OF FDI

Local market is affected badly Affects the enviornment

FACTORS OF INVESTMENTS

GDP : -Growth over the past few years averaging 8% & 2nd largest emerging market.

INTEREST RATE :- Highest rates of return on investment POLITICAL SCENARIO : - Liberal, largest democracy, political stability IIP :- Higher IIP data shows demand in industrial & manufacturing industry Skilled and competitive labours force World's 4th largest economy & 2nd largest pharmaceutical industry Second largest group of software developers after the U.S. Lists 6,500 companies on the bse (only NYSE has more) Low costs & tax exemptions in SEZ

2011 Month millions)

Jan Feb March April May June July(26)

Net Investment(USD
-1049.05 -1006.61 1540.33 1617.75 -1376.27 1014.12 1697.33

Net Investment (USD millions)

2000 1500 1000 500 0 -500 -1000 -1500 -2000 Net Investment (USD millions)

YEAR 2008 2009 2010

FDI Inflow $42.5 billion $35.6 billion $24.64 billion

FDI inflow billion $

45 40 35 30 25 20 15 10 5 0 2008 2009 2010 2011 (till date) FDI inflow billion $

likely to be $1.6 trillion in 2011: UN Year Global FDI inflow 2008 1.74 trillion 2009 1.19 trillion 2010 1.24 trillion 2011 1.6 (expected)

2000 1800 1600 1400 1200 1000 800 600 400 200 0

Global Inflow India inflow

The inflows via the Foreign Direct Investment (FDI) route declined to USD 3.39 billion in Q4FY11 as against USD 5.03 billion in the previous quarter. The cumulative inflows for FY11 at USD 19.46 billion were 24% lower than the USD 25.72 billion in FY10 and the lowest in the past four years While Mauritius (36%), Singapore (9%) and USA (6%) remained the largest source of FDI inflows, the inflows from all three countries registered a decline of 33% in FY11. Six out of the top 10 sectors that received FDI, including real estate, construction, telecommunication and services, registered a decline in FDI investment in FY11, While metals, petroleum, automobiles and chemicals received higher FDI in FY11. While the FDI inflows increased to USD 3.12 billion during April 2011 (USD 2.21 billion in April 2010), the sustenance of this trend is yet to be seen.

India is the only emerging market with a large fiscal deficit and a large debt/GDP ratio. improving business conditions in the developed world . Crude is the major component of Import basket. More attractive valuation of Taiwan, Korea and Brazil compared to India and China. RBI and SEBI policy is the major driver of FII inflow. FDI flows have seen 25 per cent drop during the past 12 months year-on-year. Bottlenecks- Red tape and Problem of Large scale land acquisition