Fdi Fii Final

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� Generally speaking FDI refers to capitalinflows from abroad that invest in theproduction capacity of the economy and are

´usually preferred over other forms of externalfinance because they are non-debt creating,non-volatile and their returns depend on theperformance of the projects financed by the

investors. FDI also facilitates internationaltrade and transfer of knowledge, skills andtechnology.µ



� Financial incentives (Funds from localGovernment)

� Fiscal incentives (Exemption from importduties)

� Indirect incentives (Provides land)

� Political stability

� Market potential & accessibility

� Large economy

� Market size

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� Liberal, largest democracy, PoliticalStability

�

Second largest emerging market (US$ 2.4trillion)

� Skilled and competitive labors force

� highest rates of return on investment

� Second largest group of softwaredevelopers after the U.S.

� lists 6,500 companies on the Bombay Stock

Exchange (only the NYSE has more)8/20/2011 4



� World's fourth largest economy & secondlargest pharmaceutical industry

� growth over the past few years averaging8%

� has a middle class estimated at 300million out of a total population of 1billion

� Second largest English-speaking,scientific, technical and executivemanpower

�

Low costs & Tax exemptions in SEZ8/20/2011 5



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Investing in India

Automatic RoutePrior Permission

(FIPB)

General rule

No prior permission

requiredOnly information to theReserve Bank of Indiawithin 30 days of inflow/Issue of shares

By exception

Prior Government

Approval needed

Decision generallyWithin 4-6 weeks

Foreign Investment Promotion Board (FIPB)



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Electricity

Hotel, hospitals

Real state Mining

Mobile Sector

Automobile Telecommunication



8/20/2011 8

Retail

I.T

Oil & Energy

Power sector

Pharmaceuticals &

Chemicals

Coal, Roads & Highways

Diamond, Gold, Silver ,

Minerals Atomic minerals

Cigar and cigarettes of

tobacco



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Hotel & Tourism ± 100%

Non-Banking Financial Companies (NBFC) ± 49%

Insurance ± 49%

Telecommunication ± 100%Power ± 100%

Drugs & Pharmaceuticals - 100%

Roads, Highways, Ports and Harbors ± 100%

Pollution Control and Management ± 100%

Call Centers in India / Call Centers in India ± 100%

Business Process Outsourcing BPO in India ± 100%



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�Atomic energy

� Nidhi company

�Betting and gambling�Chit fund business

�Plantation or agricultural activities

�Real estate business

�Retail trading�Railway transport

�Mining of chrome, zinc, gold, diamonds, copper,

iron, gypsum, manganese, and sulfurAmmunition

and arms



Companies Sector Investment

Wal mart,Marks Retail US$ 10 Billion

Intel Corp. I.T US$ 40 Billion

British & cairn Oil & Energy US$ 2 Billion

Essar power Power sector US$ 2 Billion

Toyota Automobile US$ 10.51 Billion

Panasonic Electronics US$ 200 million

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Rank Country Total 2000 to

2010

% of

Total of all

Countries

1. Mauritius 39,379 442. Singapore 8,071 9

3. U.S.A 6,508 7

4. U.K 5,289 6

5. Netherlands 3,701 4

5. Cyprus 2,579 3

6. Germany 2,379 3

7. France 1,233 1



� Foreign institutional investor means ´aninstitution established or incorporated outsideIndia which proposes to make investment in

India in securities ´� It is used most commonly in India to refer to

outside companies investing in the financialmarkets of India.



� One who propose to invest theirproprietary funds or on behalf of "broadbased" funds or of foreign corporates and

individuals and belong to any of theunder given categories can be registeredfor FII.

� Pension Funds

� Mutual Funds� Investment Trust� Insurance or reinsurance companies� Endowment Funds



� University Funds� Foundations or Charitable Trusts or

Charitable Societies who propose toinvest on their own behalf, and

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

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� India opened its stock market to foreign investors inSeptember 1992

� Since 1993, received portfolio investment fromforeigners in the form of foreign institutional

investment in equities.� This has become one of the main channels of FII in

India for foreigners.

� In order to trade in Indian equity market foreign

corporations need to register with SEBI as ForeignInstitutional Investor (FII).



As per Regulation 6 of SEBI (FII)Regulations,1995, Foreign InstitutionalInvestors are required to fulfill the followingconditions to qualify for grant of registration

� Applicant should have a goodtrack record� The applicant is required to have the permission under

the provisions of the Foreign Exchange ManagementAct, 1999 from the Reserve Bank of India.

�

Applicant must be legally permitted to invest insecurities outside the country or its in-corporation /establishment.

� The applicant must be a "fit and proper" person.



Current financial instruments are available for FIIinvestments

� Securities in primary and secondary marketsincluding shares, debentures and warrants ofcompanies, unlisted, listed or to be listed on arecognized stock exchange in India;

� Units of mutual funds;� Government Securities;

� Derivatives traded on a recognized stockexchange ;� Commercial papers



Nature of Income Tax Rate:

1. Short-term capital gains 30%

2. Long-term capital gains 10%.

3. Corporate dividend declared after June 01, 1997 isexempted

4. Interest Income 20%

Short-term Capital Gain: Capital gain on sale of a security held for a periodof less than one year is termed as short-term capital gain

Long-term capital gain: Capital gain on sale of a security held for periodmore than one year is termed as Long-term capital gain



� FII flows supplements and augmenteddomestic savings and domestic investmentwithout increasing the foreign debt of our

country� Capital inflows to the equity market increase

stock prices, lower the cost of equity capitaland encourage the investment by Indian firms

� The expert group opines that FII inflows havesome savings like features



� In the past four years there has been more than $41trillion worth of FII funds invested in India.

� This has been one of the major reasons on the bullmarket witnessing unprecedented growth with the BSE

Sensex rising 221% in absolute terms in this span.� The present downfall of the market too is influenced as

these FIIs are taking out some of their invested money.

� For long-term value investors, there·s little because for

worry but short term traders are adversely gettingaffected by the role of FIIs are playing at the present.



� In the Indian stock markets movement of thestock depends on the limited no of stocks

� As FIIs purchase and sell these stocks there is a

high degree of volatility in the stock market� If any set of development encourages outflow

of capital that will increase the vulnerability ofthe situation in the stock market

� In India there have been many such incidentsin the recent past



The degree of volatility can be attributed to thefollowing reasons:

� The increase in investment by FIIs increases stockindices the stock prices and encourages further

investment . In this event when any correction takesplace the stock prices decline and there will be pull outby the FIIs in a large numbers as earning per sharedeclines

� The FIIs manipulate the situation of boom in such amanner that they wait till the index rises up to a certainheight and exit at an appropriate time. This tendencyincreases the volatility further



FDI

FDI is when a foreign

company brings capital into acompany or economy to set

up a production or some

other facility.

FDI have control on the

company

FII

FII is when a foreign

company buys equity in

any company through

stock market.

FII mostly, does not have

control on the company



FDI

FDI involves in direct

production activity and is

long term in nature.

FDI brings long term

capital.

FII

FII is mostly the short

term investment mostly in

financial market.

FII brings short term

capital.



MonthGross

Purchase(Cr)

GrossSale(Cr)

NetInvestment

(Cr)

Cummulative

Investment($Mn)

January 2011 27,514.60 16,428.20 11,086.20 2,446.95

February 2011 15,604.90 17,380.10 -1,775.20 -393.69

March 2011 23,632.60 22,197.90 1,435.00 315.00

April 2011 22,979.40 23,191.00 -211.20 -45.70

May 2011 24,929.50 22,281.40 2,648.30 602.74

June 2011 25,630.30 27,269.20 -1,639.00 -368.73

July 2011 22,643.30 17,897.60 4,745.90 1,068.17

Au u t 2011 11,389.00 11,385.70 3.30 -10.52

26



YearGross

Purchase(Cr)

GrossSale(Cr)

NetInvestment

(Cr)

CummulativeInvestment

($Mn)

2010 205,782.40 159,306.80 46,475.80 10,131.01

2009 112,315.30 107,620.90 4,694.50 1,079.46

2008 48,557.60 36,488.50 12,069.30 2,980.20

2007 31,425.40 22,009.30 9,417.00 2,295.30

2006 10,964.80 6,916.10 4,048.70 882.00

2005 6,863.80 12,040.10 -4,316.20 -968.80

2004 13,645.50 10,730.80 3,075.80 765.66

2003 10,126.79 5,670.31 4,495.16 969.40

2002 2,778.25 2,710.93 67.47 80.80

2001 4,741.86 4,819.60 98.90 45.90

2000 2,876.40 2,735.60 273.20 59.4027



� U.S. debt crisis

� Interest rates

� Corruption

� Closed mindset

� Higher returns

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Fdi Fii Final