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A STUDY ON FOREIGN INSTITUTIONAL INVESTMENTS IN
INDIAN MARKET
Dissertation Submitted in partial fulfillment of the requirements for the award of
the Degree
MASTER OF BUSINESS ADMINISTRATION
OF
BANGALORE UNIVERSTY
BY
USHA RANI.R
Register no
05JJCM6057
Under the Guidance of
Dr. Justin Nelson Michael
(Faculty Guide)
KRISTU JAYANTI COLLEGE OF MANAGEMENT & TECHNOLOGY
Bangalore – 560077
2007
1
CERTIFICATE FROM GUIDE AND HEAD OF THE INSTITUTION
Certified that this dissertation entitled “Foreign Institutional Investments in Indian
Markets”, submitted in partial fulfillment for the award of MBA Degree of
Bangalore University was carried out by Ms.Usha rani.R under the guidance of
Prof.Dr.JustinNelson Michael
This has not been submitted to any other University or Institution for the award of
any degree /diploma/certificate.
GUIDE DEAN
MBA DEPARTMENT
PRINCIPAL
2
STUDENT’S DECLARATION
I hereby declare that this dissertation titled Foreign Intuitional Investments
in Indian Markets submitted by me to the department of management, Bangalore
University in partial fulfillment of the requirements of MBA programme is a
bonafide work carried by me under the guidance of Prof . .Dr.Justin Nelson
Michael. This has not been submitted earlier to any other university or institution
for the award of any degree, diploma/ certificate or published any time before.
USHA RANI.R
EXECUTIVE SUMMARY
3
Foreign institutional investors in Indian market is the topic which I have been
selected because I want to do some thing new and interesting
FII’s seem to have been following a hedging strategy with simultaneous
Investments in cash and derivatives market.
Foreign investment – both portfolio and direct varieties – can supplement
domestic savings and augment domestic investment without increasing the
foreign debt of the country.
Such investment constitutes non-debt creating financing instruments for the
current account deficits in the external balance of payments. Capital inflows into
the equity market give higher stock prices, lower cost of equity capital, and
encourage investment by Indian firms.
Foreign institutional investors (FII’s) were net sellers from November 1997
through January 1998. The outflow, prompted by the economic and currency
crisis in Asia and some volatility in the Indian rupee, was modest compared to
the roughly dols 9 billion which has been invested in India by FII’s since 1992.
Foreign institutional investors (FII’s) were net sellers from November 1997
through January 1998. The outflow, prompted by the economic and currency
crisis in Asia and some volatility in the Indian rupee, was modest compared to
the roughly dols 9 billion which has been invested in India by FII’s since 1992.
Every year since FII’s were allowed to participate in the Indian market, FII
net inflows into India have been positive, except for 1998-99. This reflects the
strong economic fundamentals of the country, as well as the confidence of the
foreign investors in the growth with stability of the Indian market. The year 2003
marked a watershed in FII investment in India. FII’s started the year 2003 in a big
way by investing Rs. 985 crore in January itself.
4
ACKNOWLEDGEMENT
First and foremost, I praise and thank God Almighty from the depth of my
heart, which has been the source of strength in the completion of this
Dissertation Work.
I would also like to express my gratitude to all my respondents for having
cooperated with me and having provided me with all the relevant information.
There was also a lot of help and encouragement that I had received from them in
order to complete this Project.
It is my profound concern to thank the Principal, Rev. Fr. Josekutty P. D,
Kristu Jayanti College who paved the path for offering me this opportunity and
avenues of infinite possibilities of knowledge.
And I am deeply indebted to Dr. JUSTIN NELSON MICHAEL, Kristu
Jayanti College, for his guidance, assistance and for giving all the formal
support to conduct this stud and for completing this Project Work.
I am also thankful to my sisters and friends for their encouragement and
support, Finally, I would like to express my sincere gratitude to all those who
spent their valuable time for providing the necessary data for this Organizational
Study.
USHA RANI.R
5
CONTENTS
Chapter 1
Introduction 1-20
1.1 Background of the study
1.2 In flows from foreign Institutional Investors
1.3 FII’s Growth in India
Chapter 2
Research Design 21-23
2.1 Statement of the problem
2.2 Literature Review
2.3 Scope of the study
2.4 Objective of the study
2.5 Methodology
2.6 Plan of Analysis
2.7 Limitation of the study
Chapter 3
Industry Profile 24-40
Chapter 4
Data Analysis and Interpretation 41-57
Chapter 5 58-60
Findings, Suggestions, conclusion
Bibliography
6
LIST OF TABLES/GRAPHS
Table No. Title Page No.
1. The table shows the* Net investment at US $ mn. at monthly exchange rate
41-42
2. FII’s shareholding in the year 43-44
3. t test results 44-45
4 Shareholding Pattern in Nifty Companies as of
September 2004
45-46
5 Value of FII’s Investment 46-47
6. Cap and Gap Analysis of FIIs Investment 48-49
7 Gap in Market Value 49-50
8
9
10
11
Trading Strategy of FII’s
FII Net Investments in different years
Gap Available for investments
Gap Analysis of FII’s Investment at Market Value
51
52-53
53-54
55-56
7
CHAPTER-1
INRODUCTIO
8
1 INTRODUCTION
1.1 Background of the study
Foreign investment refers to investments in the financial assets and production
processes of another country. After the opening up of the borders for capital
movement, these investments have grown in leaps and bounds. The effect of
foreign investment, however, varies from country to country. It can affect the
factor productivity of the recipient country and can also affect the balance of
payments.
In developing countries there has been a great need for foreign capital, not only
to increase the productivity of labor but also because foreign capital helps to
build up the foreign exchange reserves needed to meet trade deficits. Foreign
investment provides a channel through which developing countries can gain
access to foreign capital. It can come in two forms: Foreign Direct Investment
(FDI) and Foreign Institutional Investment (FII).
Foreign direct investment involves in direct production activities and is
also of a medium- to long-term nature. But foreign institutional investment is a
short-term investment, mostly in the financial markets. FII, given its short-term
nature, can have bidirectional causation with the returns of other domestic
financial markets such as money markets, stock markets, and foreign exchange
markets.
Hence, understanding the determinants of FII is very important for any
emerging economy as FII exerts a larger impact on the domestic financial
markets in the short run and a real impact in the long run.
9
The present study examines the foreign institutional investment in India, a
country that opened its economy to foreign capital following a foreign exchange
crisis.India, being a capital scarce country, has taken many measures to attract
foreign investment since the beginning of reforms in 1991 upto the end of
January 2003.
India succeeded in attracting a total foreign investment of around U.S.$48
billion out of which U.S.$12 billion was in the form of FII. These figures show the
importance of FII in the overall foreign investment program. India is in the
process of liberalizing its capital account, and this has a significant impact on
foreign investment and particularly on FII, which affects short-term stability in the
financial markets.
Hence, there is a need to determine the push and pull factors behind any
change in the FII, so that policies can be framed to influence the variables that
attract foreign investment. Also, FII has been the subject of intense discussion,
as it is held to be responsible for having intensified the currency crises of the
1990’s in East Asia and elsewhere in the world.
Foreign Institutional investors are the primary source of investment in
India. In September 1992 the Government of India announced the opening of the
country’s stock market to direct participation by FII’s through guiding for FII. In
November 1995 the regulations had been notified largely based on the earlier
guidance. The regulation require FII to register with SEBI and to obtain approval
from the RBI of India under the FII Act,1973 to enable them to buy and sell
securities to open foreign currency and rupee bank accounts and to remit and
repatriate funds.
10
One category of institutional investors eligible for registration as FII who
proposed to invest on their own behalf includes Pension Funds, Mutual Funds,
Investment Trusts, Insurance Companies, Charitable Societies. The other
categories of FII’s who proposed to invest their proprietary funds on or behalf of
broad based funds which are registered with SEBI as of accounts of FII’s include
asset management companies, investment advisor, nominee companies,
institutional portfolio managers, trustees and power of attorney holders.
FII may invest in India through two routes. One is Equity investment route
and 100%debit.Under the equity investment route 100% investment could be in
the equity related instruments or upto 30% could be invested in debit instrument.
A FII or a sub-account can hold up to 10% of paid up equity capital of any
company. The total investment by FII and sub-accounts in any Indian Company
cannot exceed 40% of its total paid up capital. FII have to pay tax at the rate of
10% on long term capital gains at 30% on short term capital gains and at the rate
of 20% on interest income. The amount invested in FII is fully convertible. For
this purpose FII are required to seek permission from the RBI under the Foreign
Exchange Regulation Act 1973. The FII which are active participants in the
Indian securities have been allowed to lend stocks through and approved
intermediary.
1.2 In flows from foreign Institutional Investors
Inflows from Foreign Institutional Investors (FII) into India have been
strong. FII’s poured in Rs7.49 bn, taking their net investment close to the billion
dollar mark (US$971.9mn). Foreign funds were net buyers of only US$316.7mn
in the Indian equities. Their net investment was US$1.35bn. FII’s were net sellers
of US$63.7mn. Year-to-date, their net inflows stand at US$2.58bn.
11
Overall fund flows into the emerging markets too have been good.
Emerging markets equity funds saw net inflows to the tune of US$1.1bn,
according to the Emerging Portfolio Funds Research (EPFR). With the latest
round of inflows, emerging market equity funds have attracted a net of about US
$4.9bn.
Within the emerging market space, investors particularly took a liking to
Latin America, brining in about US $260mn during the week under review,
totaling 1.03% of assets under management. "Investors responded to evidence
that demand for the region’s commodities will continue to underpin prices, In
flows into the geographically-diversified Global Emerging Markets (GEM) equity
funds were only 0.24% of assets under management. Asian funds (ex- Japan)
saw the largest inflows, pulling in a net of US $472.7mn. GEM equity funds have
seen net inflows of over US $2bn.
However, this is much lower than US $11.45bn these funds pulled in
during the same period. Japanese funds had net outflows for the fifth time in six
weeks amid nagging concerns about the strength of the world’s No.2 economy.
Global equity funds, dedicated largely towards the developed markets, attracted
US $2bn of inflows during the week and have now recorded net inflows of around
US $20bn so far in 2007.
In 2006, these funds had witnessed net inflows of US $29.6bn. "These
funds benefited from their heavy exposure to Europe. Equity markets in France,
Germany, Italy, Spain and the UK remain at or around six-year highs thanks to a
better than expected earnings outlook and a surge in mergers and acquisitions
activity," . But investors in US equity funds domiciled outside of the US were not
impressed since they were responsible for the redemptions, removing US
12
$390mn from these funds. Still, the US $153.9mn of outflows from all US equity
funds was better than the stronger outflows of recent weeks," according to EPFR.
Foreign Institutional Investors
FII’s including pension funds, mutual funds, investment trusts, university
funds, endowments, foundations or charitable trusts or charitable societies, etc.
are permitted to invest in all securities, i.e. equity shares/ debentures/ PCDs
/FCDs /Rights renunciations /warrants of Indian companies (other than Banking
Companies) listed as well as unlisted, dated Government securities, Treasury
bills and units of domestic mutual fund schemes in the primary and secondary
markets. Investments by FIIs will be subject to a ceiling of 24% of the total paid
up equity capital of the company.
The ceiling would apply to all holdings taken together including
conversions out of the fully and partly convertible debentures issued by the
company. The holding of a single FII or each SEBI approved sub-account of an
FII or the concerned FII group in any company would also be subject to a ceiling
of 10% of the total issued and paid up capital of the company. Indian companies,
however, would be permitted to raise the normal ceiling limit of 24% to 40% of
the issued and paid up capital of the company provided it has been approved by
the Board of Directors of the company and a Special Resolution is passed to that
effect by the General Body.
The ceiling of 24% or 40%, as the case may be, applicable for investment
by FII’s will not include investments made by NRI’s / OCB’s under the Portfolio
Investment Scheme. It will also not include direct foreign investment by an FII as
a foreign collaborator and investment by FII’s through off-shore funds,
13
Global Depository Receipts and Euro-Convertible Bonds. FII’s are
required to register themselves with Securities and Exchange Board of India
(SEBI) before they invest in the Indian capital market. Application for registration
should be made by FII’s to SEBI in the prescribed form in duplicate.
The application will be forwarded by SEBI to Reserve Bank. Reserve Bank
will grant permission under FERA 1973 to the bank branch designated by the
applicant FII to buy/sell equity shares/ debentures/ warrants/dated Government
securities/Treasury Bills /units of domestic mutual funds. Reserve Bank's
permission will be initially valid for five years and will be operative only after
obtaining registration from SEBI. This permission can be renewed for a further
period of five years on request.
Reserve Bank's permission would enable the FII’s to buy/sell the
securities and remit the income/dividend/sale proceeds after payment of
applicable taxes through the designated bank branch. Reserve Bank's
permission will also cover investment in shares/debentures of Indian companies
in primary market i.e. new issues provided the company has reserved certain
quota out of its public issue in favor of FII’s.
The designated bank branch is required to submit to Reserve Bank a
statement in form LEC(FII) on daily basis in respect of purchases/ sales of
shares/ debentures made for the purpose of monitoring by Reserve Bank the
overall ceiling of 24% or 40%, as the case may be, referred to in sub-paragraph .
In order to facilitate making of investments in India and repatriation of
income/sale proceeds of such investments, Reserve Bank will permit the
designated bank to open a foreign currency denominated account and a special
Non-resident Rupee account in the name of FII.
14
The designated bank branch will also be permitted (a) to transfer funds
from foreign currency account to rupee account and vice versa, (b) to make
investments out of the balance in the rupee account, (c) to credit sale proceeds
of shares and other investments as also dividend/interest earned on the
investments to the rupee account and (d) to transfer the repatriable proceeds
(net of taxes) from the rupee account to the foreign currency account. Reserve
Bank vide its Notification No.F.E.R.A.212/99-RB dated 18th October 1999 has
granted general permission to mutual funds in India to issue units or similar
instruments to FII’s under the schemes approved by Securities and Exchange
Board of India and to send such units/instruments out of India to their global
custodians, as also to repurchase units/instruments from FII’s
Foreign institutional investors (FIIs) are back in the Indian stock markets.
In April 2007, the net inflow of FII investment in equities has touched $1.56 billion
as against a net outflow of $ 243.90 million in March 2007.
The companies have good order positions. And with India emerging as a
manufacturing hub after China, the growth story is likely to continue. Though
inflation and rising interest rates are casting a shadow over high growth rate,
investors think that performance of the Indian companies won't be affected due to
strong domestic and international demand.
In 2007, the net investment of FII’s in stocks has reached $3.05 billion as
against $ 3.57 billion in the same period of the last year. Foreign investors have
turned positive (buyers) in April 2007 after becoming net sellers in March. In
February also FII’s were aggressive buyers and increased their exposures by
$1.62 billion (Rs.7240crore). But the 30-share sensitive index of Bombay Stock
Exchange (BSE) fell 1,153 points to close at 12,938 on February 28 as against
the close of 14,091 on last trading day of January 2007.
15
However FII’s become net sellers, but the Sensex improved marginally by
134 points. Though FII’s are the major players, domestic investors also play
important roles in the equity market.
Unless FIIs turn big sellers or buyers, market is not hugely influenced by
them. When FII’s were net sellers of $370.90 million, Sensex fell by 541 points to
close at 12,938.
When FIIs were net sellers by $99 million, the Sensex improved by 222
points to close at 13,160 points. On March 6, 2007, when FIIs were net sellers by
128.70 points, Sensex improved by 282 points to close at 12,697 points. But as
FII’s net investment so far in the Indian capital market is $52.14 billion and will
play an important role in the market. In April 2007, the Sensex has improved by
836 points on the back of strong FIIs' inflow.
FII inflows cross US$ 3 bn mark
It's raining dollars in the Indian stock market with the overseas investment
on the local bourses crossing three-billion dollars mark since the beginning.
Foreign Institutional Investors have put in a net of US$3.05 billion in the Indian
stocks so far in 2007, while taking their total net investment in the country so far
to over US$52 billion. However, the net FII inflows in the first four months of 2007
are over a billion dollars.
More than half of the net investment by FII’s in the month of April 2007
alone after the overseas investors returned to the bourses with positive
sentiments as Sensex regained its once-lost 14,000 level. The bourses had
witnessed a herd-like flight of FIIs after a sharp fall in February but with the
corporate earnings results meeting or beating expectations, the sentiments have
improved considerably, said a broker.
According to the data available with the market regulator SEBI, FIIs
purchased stocks worth close to Rs 46,400 crore and sold stocks worth about
16
Rs 39,500 crore in April 2007, taking their net investment to about Rs 6,900 crore
(about 1.56 billion dollars).
However, the net FII investment for January-April period is estimated to
remain around three-billion dollar level, as against about 3.3 billion dollars in the
same period of 2006.FII’s had purchased stocks worth a net of about eight billion
dollars in entire 2006, as against a record high of 10.7 billion dollars in 2005.
After playing second fiddle to foreign institutional investors for over a decade,
domestic mutual funds are with a combined equity asset of about $23-24 billion
now, mutual funds are regularly playing counter-balance to FII’s. According to
market players and fund managers signs of rising to a position of strength from
where they could call the shots in the Indian market boosted by huge inflows in a
slew of new equity fund offers in the first half of the current year, the MF’s had
provided a much-needed cushion to the marker in May and June when FIIs were
selling heavily.
As a result, while the net fund infusion by FIIs between May 11 and
October 13,2005 stands at about Rs 3,000 crore, during the same period the
MFs had put in more than double that amount SEBI data showed. This welcome
change, according to fund managers, was possible mainly because of increasing
retail participation.
1.3 FII’s Growth in India
Mutual funds have also been net buyers though they are conservatively
cautious on the markets. The problem is that since FII’s have been buying for a
series of Six months it is a time for them to sell off and are they going to again
dump the stocks. There may be bouts of profits booking in the markets but these
are good signs and are important for markets to consolidate before moving
ahead.
International capital flows and capital controls have emerged as an
important policy issues in the Indian context as well. The danger of Mexico-style
‘abrupt and sudden outflows ’ inherent with FII flows and their destabilizing
17
effects on equity and foreign exchange markets have been stressed. Some
argues that FII flows have no significant benefits for the economy at large. A
proper understanding of the nature and determinants of these flows, however, is
essential for a meaningful debate about their effects as well as predicting the
chances of their sudden reversals.
FII’s' demand for quick gains
Also, the national interest may not always coincide with the FIIs' demand
for quick gains,conflict situations can emerge. The country must learn to deal
with such conflicts without affecting its interests. Institutions are becoming larger
and in many cases dwarf sovereign governments. Their ability to arm-twist
central banks and finance ministries is well known. Hence, while encouraging
foreign fund flows in the stock market, the policy-makers must be prepared for
the worst. As of December 2006 993 FIIs were registered with the Securities and
Exchange Board of India. Positive tidings about the Indian economy combined
with a fast-growing market have made India an attractive destination for foreign
institutional investors (FIIs).
The number of foreign institutional investors (FIIs) registered with the
Securities and Exchange Board of India (SEBI) has now increased to 1,030. In
the beginning of 2006, the figure was 813. As many as 217 new FIIs opened their
offices in India during 2006. This is the highest number of registrations by FIIs in
a year till date. The previous highest was 209 in 2005. The net investments made
by the institutions during 2006 was US$ 9,185.90 million against US$ 9,521.80
million in 2005
India opened its stock market to foreign investors in September 1992 and
since then has received portfolio investment from foreigners in the form of foreign
18
institutional Investment in equities. This has become one of the main channels of
FII in India. In order to trade in the Indian equity market, foreign corporations
need to register with the Securities and Exchange Board of India (SEBI) as
foreign institutional investors.
India allows only authorized foreign investors to invest in pension funds,
investment trusts, asset management companies, university funds, endowments,
foundations, charitable interests and charitable societies that have a track record
of five years and which are registered with a statutory authority in their own
country of incorporation or settlement. It is possible for foreigners to trade in
Indian securities without registering as an FII but such cases require approval
from the Reserve Bank of India (RBI) or the Foreign Investment Promotion Board
(FIPB).Foreign institutional investors generally concentrate on the secondary
market. The total amount of foreign institutional investment in India has
accumulated to the formidable sum of over U.S.$12 billion as of January 2003..
1.4 Some investment highlights:
Billionaire investor George Soros-owned fund Dace croft and New York-
based investment firm Blue Ridge are picking 21 per cent equity stake in Anil
Dhirubhai Ambani Group's Reliance Asset Reconstruction Company (Reliance
ARC).
A clutch of financial investors including Government of Singapore
Investment Corporation (GIC) and the New York-based hedge fund Galleon
Partners have picked up around 20 per cent stake in Edelweiss Capital for
around US$ 90 million. US-based Private equity major Blackstone Group is close
to investing nearly $60-65 In India, all of us are used to the notion of `FII' as
being the channel through which foreign investors access the Indian market.
But looking forward, the future easing of capital controls in India will some
19
day involve eliminating the concept of the FII, and opening up the equity spot and
derivatives markets to anyone in the world. The FII is a piece of State-induced
canalisation, and it will surely (someday) go the way of canalisation to favour the
State Trading Corporation or import license holders. It is, hence, of interest to all
of us to ponder what lies beyond.
.
The Indian firm will treat the orders coming from the U.S. brokerage firm
as one big customer, except for the purpose of a `large trader reporting system'
(which isn't yet in place in India) where the names of large positions are required.
The article says: Regulatory authorities in some countries have responded by
banning omnibus accounts, but this leads to at least two problems.
First, it becomes less efficient for global brokers and their customers to
enter those markets, and in some cases legally impossible. Second, some
market participants will resort to trading "look-alike" contracts with their broker on
an over-the-counter basis. The broker then offsets these contracts by
establishing an identical position on the exchange.
This arrangement does allow these customers to trade these markets, but
it provides the regulators with even less information on the ultimate customer. In
any case, many institutional investors do not like the lack of price transparency of
over-the-counter contracts, so they avoid these markets. This deprives new
exchanges of liquidity. In India, these "look-alike" contracts go by the name of
Participatory Notes.
It is found fascinating that in the same issue of Futures Industry magazine,
there was an article on developments in Taiwan which is a country which is in the
midst of this FII Ombinus Accounts transition. Taiwan is like India in having a
very big direct retail participation in the securities markets. Roughly 10% of their
20
population trades - in an Indian setting, that would translate to 100 million direct
market participants.
Taiwan is trying to move towards one thing is right: to merger between
the spot stock exchange and the futures exchange. Right from the L. C. Gupta
report onwards, India has been clearheaded on this, requiring no silly separation
between the spot and the derivative. But the other frontiers which Taiwan is
moving on are a jump ahead of us. They are removing their QFII system, and
shifting to omnibus accounts. They are worrying about offering a range of traded
products which are interesting to global market participants - such as gold futures
and a dollar denominated Taiwanese stock market index - so as to make
Taiwan a trading centre for market participants from all over the world. They are
increasing the size of position limits. Taiwan is one of the unhappy countries
which has taxation of financial transactions - a bad idea in public finance if there
ever was one. They seem to be headed to drop the tax rate from 2.5 basis points
to basis point. Finally, you might find this article on Mexico interesting; they
already have omnibus accounts.
The year 2007 was one more unusual year in India's stock markets. It
began with the Sensex still at a high and above the 6000 mark. It witnessed a
decline to a low in mid-May of around 4500, delivered ultimately with the market's
single day loss of close to 565 points. It then registered a recovery that turned
into a bull run, which took the Sense to 6679 on the first trading day in the New
Year. And then it witnessed an abrupt end to the bull run, signalled by a 316-
point intra-day decline in the Sensex
FII Investment in future republic offerings
Securities and Exchange Board of India’s latest guidelines on
participation of qualified the FII Investment in future republic offerings under the
new norms, QIBs will now have to bring in at least 10% margin while submitting
bids in public offers through the book building route. So far, while institutional
21
investors — like FIIs, banks and mutual funds — were not required to deposit
any money while submitting bids for a public issue through book-build route,
retail investors had to deposit the entire bid amount with the application.
That’s not all. Sebi has also drafted norms for allotment of shares in QIB
category, which is normally 50% of the offer size. So far, allotments to QIBs were
the discretion of the issuer. Under the new guidelines, allotment of shares to
QIB’s shall be on a proportionate basis.
A senior merchant banker said this would make it difficult to market shares
through the book-build route to FIIs based outside India. He said many of the
large FIIs registered with Sebi mostly operate from Singapore, Hong Kong,
London, New York and Los Angeles. "These large international players would not
change the norms that they were following so far to invest in India
A source said FIIs do not invest in a country unless they are sure of an
investment. "Even when they operate in secondary market, they buy the shares
and then move in the fund just before the pay-in time." With the new system
restricting issue managers from committing shares to an FII, sources said, many
large institutional investors are not likely to apply at all. "Besides, FIIs are not
interested in buying shares in small lots as it tends to increase cost of operation.
In the new system, the number of shares allotted to an FII would be restricted to
few hundreds which they might not be interested in taking at all."
After playing second fiddle to foreign institutional investors for over a
decade, domestic mutual funds are now showing signs of rising to a position of
strength from where they could call the shots in the Indian market. With a
combined equity asset of about $23-24 billion now, mutual funds are regularly
playing counter-balance to FIIs, market players and fund managers said.
Boosted by huge inflows in a slew of new equity fund offers in the first half
of the current year, the MFs had provided a much-needed cushion to the marker
22
in May and June when FIIs were selling heavily. As a result, while the net fund
infusion by FIIs between May 11 and October 13 stands at about Rs 3,000 crore,
during the same period the MFs had put in more than double that amount, Sebi
data showed. This welcome change, according to fund managers, was possible
mainly because of increasing retail participation.
Over the last several months, whether markets were in a bullish phase or
bearish, we have always seen positive gross inflows into equity funds," said head
of equity at a fund house. This also counters the general notion that retail
investors have not participated in the current rally.
Portfolio investment flows from industrial countries have become
increasingly important for developing countries in recent years. The Indian
situation has been no different. In the year 2000-01 portfolio investments in India
accounted for over 37% of total foreign investment in the country and 47% of the
current t account deficit. The corresponding figures in the previous year were
59% and 64% respectively. A significant part of these portfolio flows to India
comes in the form of Foreign Institutional Investors ’ (FIIs ’ ) investments, mostly
in equities.
Ever since the opening of the Indian equity markets to foreigners, FII
investments have steadily grown from about Rs. 2600 crores in 1993 to over
Rs.11,000 crores in the first half of 2001 alone. Their share in total portfolio flows
to India grew from 47% in 1993-94 to over 70% in 1999-2000 1 . The nature of
the foreign investor ’ s decision-making process, that lies at the heart of the
portfolio flows, is briefly outlined While it is generally held that portfolio flows
benefit the economies of recipient countries 2 , policy-makers worldwide have
been more than a little uneasy about such investments.
23
Portfolio flows – often referred to as “ hot money ” – are notoriously
volatile compared to other forms of capital flows. Investors are known to pu ll
back portfolio investments at the slightest hint of trouble in the host country often
leading to disastrous consequences to its economy. They have been blamed for
exacerbating small economic problems in a country by making large and
concerted withdrawals at the first sign of economic weakness.
They have also been held responsible for spreading financial crises –
causing ‘contagion’ in international financial markets Prominent economists
have, for these reasons, expressed doubts about the wisdom of the IMF view of
promoting free capital mobility among countries. International capital flows and
capital controls have emerged as an important policy issues in the Indian context
as well. The danger of Mexico-style ‘abrupt and sudden outflows’ inherent with
FII flows and their destabilizing effects on equity and foreign exchange markets
have been stressed. Some authors have argued that FII flows have, in fact, had
no significant benefits for the economy at large.
While these concerns are all well-placed, comparatively less attention has
been paid so far to analyzing the FII flows data and understanding their key
features. A proper understanding of the nature and determinants of these flows,
however, is essential for a meaningful debate about their effects as well as
predicting the chances of their sudden reversals.
In an attempt to address this lacuna, this paper undertakes an empirical
analysis of FII investment flows to India. The objective at present is to gain a
better understanding of the nature and determinants of FII flows. Towards this
end we first take a look at the FII investment flows data to bring out the key
features of these flows.
1.5 Relationship between FII flows and the stock market returns in India
24
The relationship between FII flows and the stock market returns in India
with a close look at the issue of causality.The impact of other factors identified in
the portfolio flows literature on the FII flows to India. In all of these investigations
we make a distinction between the pre-Asian crisis period and the post -Asian
crisis period to check if there was a regime shift in the relationships owing to the
Asian crisis.
The section sketches a brief review of the recent literature in the area. It
provides an over view of the nature and sources of portfolio flows in India
pointing out their main characteristics. It probes into the possible determinants of
FII flows to India..
India opened its stock markets to foreign investors in September 1992 and
has, since 1993, received considerable amount of portfolio investment from
foreigners in the form of Foreign Institutional Investor ’ s (FII) investment in
equities. This has become one of the main channels of international portfolio
investment in India for foreigners . In order to trade in Indian equity markets,
foreign corporations need to register with the SEBI as Foreign Institutional
Investors (FII) . SEBI ’ s definition of FIIs presently includes foreign pension
funds, mutual funds, charitable/endowment/university funds etc. as well as asset
management companies and other money managers operating on their behalf.
The trickle of FII flows to India that began in January 1993 has gradually
expanded to an average monthly inflow of close to Rs. 1900 crores during the
first six months of 2001. By June 2001, over 500 FIIs were registered with SEBI.
The total amount of FII investment in India had accumulated to a formidable sum
of over Rs. 50,000 crores during this time . In terms of market capitalization too,
the share of FIIs has steadily climbed to about 9% of the total market
capitalization of BSE (which, in turn, accounts for over 90% of the total market
capitalization in India).
25
The sources of these FII flows are varied. The FIIs registered with SEBI
come from as many as 28 countries (including money management companies
operating in India on behalf of foreign investors). US-based institutions
accounted for slightly over 41%, those from the UK constitute about 20% with
other Western European countries hosting another 17% of the FIIs . It is,
however, instructive to bear in mind
The national affiliations do not necessarily mean that the actual investor
funds come from these particular countries. Given the significant financial flows
among the industrial countries, national affiliations are very rough indicators of
the ‘home’ of the FII investments.
In particular institutions operating from Luxembourg, Cayman Islands or
Channel Islands, or even those based at Singapore or Hong Kong are likely to be
investing funds largely on behalf of residents in other countries. Nevertheless,
the regional breakdown of the FIIs does provide an idea of the relative
importance of different regions of the world in the FII flows.
In 2004-05 portfolio investments in India accounted for about 62% of total
Foreign investment in the country and at about 1.29% of GDP well exceeded the
current account deficit (0.95% of GDP). Foreign Institutional Investors’ (FIIs’)
investments accounted for about 97.5% of this. Ever since the opening of the
Indian equity markets to foreigners, FII investments have steadily grown from
about Rs. 2,600 crores in 1993 to Over Rs.48, 000 crores in 2005. At the end of
June 2006, the cumulative FII flows to India accounted for a little over 9% of the
Bombay Stock Exchange market capitalization.
While it is generally held that portfolio flows benefit the economies of
recipient Countries, policy-makers worldwide have been more than a little uneasy
about such Investments. Often referred to as “hot money”, they are known to
stampede out at the slightest hint of trouble in the host country leaving an
26
economic wreck in their wake, like Mexico in 1994. They have been blamed for
exacerbating small economic problems in a Country by making large and
concerted withdrawals at the first sign of economic weakness. They have also
been held responsible for spreading financial crises – causing ‘Contagion’ in
international financial markets.
International capital flows and capital controls have emerged as important
policy Issues in the Indian context as well. The danger of abrupt reversals and
their destabilizing Consequences on equity and foreign exchange markets are
always a concern Nevertheless, in recent years, the government has been
making strong efforts to increase
FII flows in India from being healthy for the economy, FII inflows have actually
imposed certain burdens on the Indian economy.
Understanding the determinants and effects of FII flows and devising
appropriate Regulation therefore constitute an important part of economic policy
making in India entities covered by the term ‘FII’ include “Overseas pension
funds, mutual funds, Investment trust, asset management company, Nominee
Company, bank, institutional Portfolio manager, university funds, endowments,
foundations, charitable trusts, Charitable societies, a trustee or power of attorney
holder incorporated or established Outside India proposing to make proprietary
investments or investments on behalf of abroad-based fund (i.e., fund having
more than 20 investors with no single investor
Holding more than 10 per cent of the shares or units of the fund. FIIs can
invest their own funds as well as invest on behalf of their overseas clients
registered as such with SEBI. These client accounts that the FII manages are
known as ‘sub-accounts’.
A domestic portfolio manager can also register itself as an FII to manage
the funds of sub-accounts. A few large FIIs (less than 3% of all registered ones,
according to GOI (2005)), issue derivative instrument s called ‘participatory
27
notes’ that are registered and traded overseas, backed by the FIIs’ holdings of
Indian securities. This arrangement has raised some concerns in regulatory
circles since it makes it difficult to trace the ultimate beneficiary in the funds and
may be used to bring in “unclean” funds (funds generated Out of illegal activities)
into the Indian markets.
As of mid-July 2006, there were 932 FIIs registered with SEBI, of which
115 Were registered in the first half of 2006 itself. US-based funds accounted for
39% of all registered FIIs, followed by UK-based ones (16%), Luxembourg (7%)
and Singapore (5%). In terms of net cumulative investment, US based funds
accounted for 29% at the end of October 2005 (GOI (2005))
Though initially restricted to investing only in listed company stocks, FIIs
are now allowed to invest in equity, bonds and derivative instruments in India
subject to limits of foreign ownership for various sectors as well as ceilings on
total investment per FII. Regular FII’s follow what has come to be known as the
“70:30 rule”, i.e. they must invest no less than 70% of their funds in equity-related
instruments and may invest the remainder in debt-related instruments. There are
also some FIIs that are registered as “100 per cent debt-fund FIIs” that are
permitted to invest exclusively in debt instruments.
Although equity holdings of FIIs have received maximum attention from
the press, researchers and policymakers alike, the debt holdings of FIIs are not
wholly insignificant. As of July 21, 2006, the regular FIIs held USD 224.25 million
(about Rs. 1,009 crores) in government securities/Treasury Bills and USD 82.02
million (about Rs. 369 crores) in corporate debt. At the end of June 2006, the
open interest of FIIs in stock and index futures and options exceeded Rs 22,000
crores.
28
CHAPTER-2
RESEARCH
DESIGN
29
2.1 Introduction
Foreign companies/Individuals are permitted to invest in equity shares
traded in Indian Stock markets if they are registered as a Foreign Institutional
Investor (FII) or if they have a sub account in India.
Investment in Indian securities is also possible through the purchase of
Global Depository Receipts (GDR), American Depository Receipts (ADR),
Foreign Currency Convertible Bonds and Foreign Currency Bonds issued by
Indian issuers, which are listed, traded and settled overseas and mainly
denominated in US dollars.
FII investments in Indian capital market is more than US $ 11,000 million.
Indian Stock market with a market capitalization of over US $ 165,000 million has
been a major attraction for investors all over the world
2.2 Statement of The problem
A hectic flow of FII in Indian market witnessed a terrific bounce of sensex
from a level market of 7500-8000 to 14000. A genuine research is very much
required to study the pattern and impact of Foreign Institutional Investment.
2.3 Reviewing the Literature
A survey of the literature shows that existing studies do not account for
volatility which can be expected in most of the monthly financial time series Data
30
yet given the increase in financial market integration, both domestically and in
foreign financial markets, accounting for volatility is unavoidable.
Further, the existing studies either do not incorporate risk in foreign and
domestic markets or make use of realized risk, an approach that does not always
yield robust results.
This is because standard deviation/variance (realized risk variable)
increases in 482 Investments, either domestic or foreign, depend heavily on risk
factors. Hence, while studying the behavior of FII, it is important to consider the
relationship between unexpected risk and FII is obscure.
Therefore, while examining the impact of risk on FII, one needs to
separate the unobserved component from the realized risk.
Another possible determinant of FII is the operation of foreign factors such
as Returns in the source country’s financial markets and other real factors in the
source Economy. So far, however, studies have found that both return in the
source country stock market and the inflation rate have not exerted any impact
on FII. The world stock market capitalization had a favorable impact on the FII in
India.
Since investment in stock markets is sentiment driven, and is affected
more or less by everything, the crucial task is to identify a few critical
determinants. .
2.4 Scope Of The Study
It covers the foreign investments made in Indian capital market from 2002-2006.
2.5 Objectives of The Study
31
1. To understand the overall stock market in India.
2. To study the structure of FII in India
3. To understand the impact of FII on Indian stock market.
2.6 Research Methodology
This study is based on Secondary data which will be collected from books,
Internet, Reports, newspapers and the method of study reveals the data
gathered for analysis of data & presenting in a proper form. The collection of data
is done through-
Secondary data analysis:
These are interpretations of primary data which include encyclopedias,
textbooks, handbooks, magazines & newspaper articles.
2.7 Operational Definition Of Concepts
FII- . Means an entity established or incorporated outside India which
proposes to make investment in India.
FIPB- Foreign investment promotion is regulatory govt. agency which is
been established to promote FDI, FII in various sectors.
PLAN OF ANALYSIS
The data would be collected through secondary sources. This data is
analyzed implementing by using statistical tools, ratios, Tables etc.
32
2.7 Limitations of the study
The data collected is not available in updated form; it is one of drawbacks of
this study. The information collected is extracted from secondary data analysis
through internet & the information is already in historical format.
33
CHAPTER-3
INDUSTRY
PROFILE
34
Stock Market
Foreign Institutional Investors have put in a net of 3.05 billion dollars (over
Rs 13,500 crore) in the Indian stocks so far in 2007, while taking their total net
investment in the country so far to over 52 billion dollars. However, the net FII
inflows in the first four months of 2007 is over a billion dollars, less than the figure
invested in the same period of the previous year.
More than half of the net investment by FII’s this year came in the month
of April alone after the overseas investors returned to the bourses with positive
sentiments as Sensex regained its once-lost 14,000 level. The bourses had
witnessed a herd-like flight of FII’s after a sharp fall in February this year, but with
the corporate earnings results meeting or beating expectations, the sentiments
have improved considerably, said a broker.
According to the data available with the market regulator SEBI, FIIs
purchased stocks worth close to Rs 46,400 crore and sold stocks worth about Rs
39,500 crore in April 2007, taking their net investment to about Rs 6,900 crore
(about 1.56 billion dollars). However, the net FII investment for January-April
period is estimated to remain around three-billion dollar level, as against about
3.3 billion dollars in the same period of 2006, said another broker.
FII’s had purchased stocks worth a net of about eight billion dollars in entire
2006, as against a record high of 10.7 billion dollars in 2005. A sharp plunge of
about 30 per cent in the May-June period and another major fall in December
were the major drivers for the decline in FII inflows last year.
However, if the prevailing positive trend continues on the FII front, the total
overseas investment on the domestic bourses could rise to as high as 12 billion
dollars, while beating the record set in 2005, the broker added.
35
Besides, the depreciating dollar against the Indian rupee could also propel
the net FII inflows in terms of the US currency. A lot would depend on how the
market reacts to further corporate earnings results going forward, the analysts
believe. If the benchmark Sensex manages to regain the 14,000 level decisively
by keeping above this mark for a couple of weeks, the sentiments could get a
significant boost and herald a prolonged uptrend on the bourses.
the Sensex plunged by more than 320 points while ending a five-day upward
rally primarily driven by strong corporate results.
Foreign Institutional Investors have put in a net of 3.05 billion dollars (over
Rs 13,500 crore) in the Indian stocks so far in 2007, while taking their total net
investment in the country so far to over 52 billion dollars. However, the net FII
inflows in the first four months of 2007 is over a billion dollars, less than the figure
invested in the same period of the previous year.
More than half of the net investment by FII’s came in the month of April
2007 alone after the overseas investors returned to the bourses with positive
sentiments as Sensex regained its once-lost 14,000 level. More than half of the
net investment by FII’s this year came in the month of April alone after the
overseas investors returned to the bourses with positive sentiments as Sensex
regained its once-lost 14,000 level.
Considering the tremendous growth in India and huge FII flows coming into Asia
and more importantly China and India - India seems to be the hottest destination.
Equity booming, financial services & political environment more open leads to
positive outlook the government and the regulatory authorities have tried hard to
bring more transparency and clarity in the market processes and environment.
The growth fundamentals of the country are pretty strong and India is on target to
achieve 8% growth.
36
The FII’s have shown immense interest in our markets showcasing the
belief in our markets even though the Indian market is considered a bit
overvalued compared to its peers. So everything looks promising with a bit of
cautiousness coming from the coalition government wherein the Left does create
problems at times Growth seems to be taking more roots and spreading across
various sectors. Persistence of this growth may lead to long-term benefits in
terms of Income and Wealth. economy growing at 7-8%, significant jump in credit
off-take increase in investments
FII putting in more USD 10 billion this year The markets have seen
exceptionally high liquidity driven growth over the last year The way the markets
have sustained the high growth rates defying expectations The political stability
and conformance to liberalization and market economy principals across the
politics spectrum The main reason for being a little more optimistic is that while
there have been set backs in the reform process, there have been a few positive
signals off late.
Currently Indian equities are fairly valued, but, should the reform process
get back on track, there is potential for higher growth. FII Inflows have been
growing at an amazing rate. The Indian markets still are trading lower than other
emerging market PEs. Growth is not speculative but fundamental in nature The
Indian stock market has delivered very high returns in the past 2 years and right
now the BSE-Sensex remains at an all-time high.
The market seems to be over-heated and some of the valuations are not
sustainable. The upswing in Sensex has been mainly on account of cheap
foreign money (they do not have an option as the long term yield curve is flat)
coming into India The market may undergo a sharp correction from these levels
as the fickle-minded foreign money moves out.
37
The trigger for that would be slowdown of economic growth due to rising
current account deficit, higher inflation, lower than expected growth in corporate
earnings and global recession. Also, the quality of earnings seems suspect for a
large no. of the mid-cap companies. the BSE Bombay stock exchange as an
indicator, clearly there is too much money running after too few stocks, this has
resulted in the average PE changing from 12-13(2004) to about 15 (2005) in a
years time.
Given that India is part of the "emerging markets" and an overall bullish
sentiment of institutional funds like CALPERS this upward trend is likely to
continue. view is as regards to investment in the sectors and not in the stock
markets. Regarding investment in the stock market, within the last one year my
view has changed from being optimistic to slightly cautious. Corporate
disclosures have improved significantly over the past five years.
There has also been market structure improvement over the last 6-7
years. Investing in Indian equities always appealed to bottom-up investors, now
with increased focus on improving demographics and potential increased capital
investments over the next 15-20 years, India has become a more appealing top-
down investment story.
The Indian market has become too expensive and it has become extremely
difficult to identify undervalued investment ideas the investment climate and
market sentiment in India is very positive. The economy is on a consistently
growing trend. India Inc has been performing well and over and above
expectations. There has been a strong rebound in the investment/infrastructure
spending in the country, besides India being a preferred destination for
outsourcing. Given the growth in corporate profits and credit off take, the rally in
the stock markets and hardening interest rates seem justified
38
Over the last few years, research has brought to light a few important
features of FII flows to India. The key question has been the relationship between
FII flows and returns in the Indian markets . Clearly FII equity investments and
the stock market performance in India have been very closely interlinked. Also
both variables experience a sharp break around April of 2003 after which they
ramp up steeply. The association is unmistakable – the correlation of monthly net
FII equity inflows and monthly Sensex returns is 0.61 since April 2003 and 0.33
in the overall sample.
FII flows are routinely depicted as a major driver of Indian stock market
return in the financial press. However, research seems to suggest they are more
of an effect than a cause of stock market performance. Analyzing daily flow data
during 1999.Tthe post-Asian crisis period, stock market performance has been
the sole driver of FII flows, though monthly data in the pre-Asian crisis period
may suggest some reverse causality.
This return-chasing behavior has been confirmed using daily data during
1999-2002 in the sales of Indian securities by FIIs are affected by returns but not
purchases. Analyze monthly data over the period 1993-2000 to conclude that FII
flows are negatively related to lagged stock market returns, suggesting negative
feedback trading. There are, however, issues about the appropriateness of using
monthly data
The largest single-month pull-out of FII funds happened in May 2006 when
the FIIs withdrew over $1.7 billion (Rs. 8247 crores) followed by May 2004 ($ 719
million, Rs. 3250 crores). These were also the months with the fourth largest and
the largest single month percent decline in the Sensex respectively (15.8% and
18.8% respectively) in the post reforms era.
39
Government policy regarding FII flows
In policy circles in India, FII flows are believed to have a positive impact on
the country’s development ; so much so that encouraging FII flows – while
reducing the financial sector’s vulnerability to speculative capital flows –
constitute an objective of the National Common Minimum Programme.
Accordingly, an expert group was set up in 2004 (in addition to a
committee in 2002 which reported in 2004) to suggest ways to accomplish this
goal. The group submitted its report in November 2005 (GOI 2005). Its 6
rationale for encouraging FII flows is that such flows can increase domestic
investment without increasing foreign debt. They can raise stock prices, lower
cost of equity and stimulate investment by Indian firms and lead to improvements
in securities market design and corporate governance.
FII inflows into India
.
Net FII inflows into India increased steadily through the decade of the
1990s to reach an annual peak of US$10.25 billion in 2004-05 (Table 1).
Cumulatively, FII investments as onOctober 31, 2005 have been US$ 39.27
billion.1. Every year since FIIs were allowed to participate in the Indian market,
FII net inflows into India have been positive, except for 1998-99.
This reflects the strong economic fundamentals of the country, as well as
the confidence of the foreign investors in the growthwith stability of the Indian
market. The year 2003 marked a watershed in FII investment inIndia. FIIs started
the year 2003 in a big way by investing Rs. 985 crore in January
itself.Meanwhile, corporate India continued to report good operational results.
40
This, along with good macroeconomic fundamentals, growing industrial
and service sectors led FIIs to perceive great RBI data generally shows that
investment by FIIs has been smaller, when compared with SEBI data. This
discrepancy in the statistical system needs to be corrected. One possible
explanation may involve differences in the treatment of reinvestment of profit
earned. potential for investment in the Indian economy.
The year 2004 was one more unusual year in India's stock markets. It
began with the Sensex still at a high and above the 6000 mark. It witnessed a
decline to a low in mid-May of around 4500, delivered ultimately with the market's
single day loss of close to 565 points. It then registered a recovery that turned
into a bull run, which took the Sense to 6679 on the first trading day in the New
Year. And then it witnessed an abrupt end to end bull run, signaled by a 316-
point intra-day decline in the Sensex on January
This volatility has been visible in the medium and long terms as well. From
a low of 2924 on April 5, 2003, the Sensex had risen to 6194 on January 14,
2004, only to fall to 4505 on May 17, before rising to close at a peak of 6679 on
January 3, 2005. These wild fluctuations have meant that for those who bought
into the market at the right time and exited at the appropriate moment, the
average return earned through capital gains were higher in 2003 than 2004,
despite the extended bull run in the latter year.
There are two messages that this experience sends out. The first is that, if
market expectations can turn so whimsically, the signals or rumours on which
they are based must lack any substance since any "fundamentals" on which they
could be anchored have not shifted so violently. The second is that there must be
some unusually strong force that is determining movements in the market which
alone can explain the wild swings it is witnessing.
41
The combination of these two factors is indeed a disconcerting
phenomenon, since if some force has the ability to lead the market and the
others can be taken along without much resistance, the market is in essence
being subjected to manipulation, even if not always consciously. Not surprisingly,
recent market developments have once more focussed attention on the volatility
that has come to characterise India's stock markets.
Movements in the Sensex during the two years have clearly been driven
by the behaviour of foreign institutional investors (FIIs), who were responsible for
net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003
and 2004. These figures compare with a peak level of net purchases of $3.1
billion as far back as 1996 and net investments by FIIs of just $753 million in
2002. In sum, the sudden FII interest in Indian markets in the last two years
account for the two bouts of medium-term buoyancy that the Sensex recently
displayed.
At one level this influence of the FIIs is puzzling. The cumulative stock of
FII investment, totalling $30.3 billion at the end of 2004, amounted to just 8 per
cent of the $383.6 billion total market capitalisation on the Bombay Stock
Exchange. However, FII transactions were significant at the margin. Purchases
by FIIs of $31.17 billion between April and December 2004 amounted to around
38.4 per cent of the cumulative turnover of $83.13 billion in the market during that
period, whereas sales by FIIs amounted to 29.8 per cent of turnover..
A recent analysis by Parthaprathim Pal estimated that at the end of June
2004 FIIs controlled on average 21.6 per cent of shares in the Sensex
companies. Further, if we consider only free-floating shares, or shares normally
available for trading because they are not held by promoters, government or
strategic shareholders, the average FII holding rises to more than 36 per cent. In
a third of Sensex companies, FII holding of free-floating shares exceeded 40 per
cent of the total.
42
In 2004-05 portfolio investments in India accounted for about 62% of total
foreign investment in the country and at about 1.29% of GDP well exceeded the
current account deficit (0.95% of GDP). Foreign Institutional Investors’ (FIIs’)
investments accounted for about 97.5% of this. Ever since the opening of the
Indian equity markets to foreigners, FII investments have steadily grown from
about Rs. 2,600 crores in 1993 to over Rs.48,000 crores in 2005. At the end of
June 2006, the cumulative FII flows to India accounted for a little over 9% of the
Bombay Stock Exchange market capitalization. while it is generally held that
portfolio flows benefit the economies of recipient countries, policy-makers
worldwide have been more than a little uneasy about such investments. Often
referred to as “hot money”, they are known to stampede out at the slightest hint
of trouble in the host country leaving an economic wreck in their wake, like
Mexico in 1994. They have been blamed for exacerbating small economic
problems in a country by making large and concerted withdrawals at the first sign
of economic weakness.
They have also been held responsible for spreading financial crises –
causing contagion’ in international financial markets. International capital flows
and capital controls have emerged as important policy issues in the Indian
context as well. The danger of abrupt reversals and their destabilizing
consequences on equity and foreign exchange markets are always a concern
Foreign investment – both portfolio and direct varieties – can supplement
domestic savings and augment domestic investment without increasing the
foreign debt of the country.
Such investment constitutes non-debt creating financing instruments for
the current account deficits in the external balance of payments. Capital inflows
into the equity market give higher stock prices, lower cost of equity capital, and
encourage investment by Indian firms.
43
Foreign investors often help spur domestic reforms aimed at improving the
market design of the securities markets, and help strengthen corporate
governance
These benefits do require concomitant policy effort in terms of improving
financial regulation and corporate governance. The Reserve Bank of India (RBI)
has said 77% of the net annual foreign capital inflow into the country was for
2005-06 . This is the first time the central bank has defined volatility in foreign
capital flows with respect to India.
According to the RBI definition, volatile foreign capital inflows comprise
portfolio investment and short-term trade credit. This means RBI categorizes the
entire inflow of FII funds into the stock markets as volatile. Short-term trade credit
is defined as the credit extended to importers by suppliers of goods and services
from abroad.
According to the RBI definition, the share of such inflows in the net total foreign
capital inflows has been 76.3% in 2003-04 . The volatile component of the flow
had eased to 40.9% in 2004-05 but picked up momentum thereafter, as stock
markets have gathered steam.
In the current year, for instance, net FII inflow has been $2.39 billion,
according to Sebi data. However, despite it being clubbed as volatile, the
government has comfort room, as the total is less than 40% of total foreign
exchange reserves of the country, at present. Compared to this, inflow of FDI has
been much less.
The definition by the central bank is in reply to a question in the
Parliament about the share of volatile capital, as defined by RBI, in total foreign
capital inflow into India.
44
Further, according to estimates, the finance ministry and RBI had to spend
Rs 4,166.18 crore, about 0.2% of total fiscal deficit, to sterilise the impact of the
flow of foreign exchange into the country in 2005-06 . The sum was Rs 3,701.26
crore in 2004-05 .
In recent years, the country's stock of foreign exchange has shot up
largely through the surge in FII investment. The two instruments used to mop up
excess flow of dollars are the market stabilisation scheme (MSS) and the liquidity
adjustment facility (LAF).
While interest payments on MSS are borne by the government, “such
payments on account of LAF affect the government only indirectly through lower
net disposable income of RBI,†� the reply said.
3.2 Maximum FII flows in India
International
The classical capital asset pricing model (CAPM) predicts that, to
maximize risk adjusted returns, investors should hold a diversified market
portfolio of risky assets, irrespective of their country of residence. In practice,
however, the proportion of foreign assets in investors’ portfolios tends to be very
small, and there is a ‘home bias.’ There is evidence of the home bias decreasing
over the years. The share of foreign stocks in the equity portfolio of US investors,
for example, increased from an estimated 2 per cent in the late 1980s to about
10 per cent at the end of 1997, but is still far short of the 52 per cent of world
stock market capitalization accounted for by non-US stocks. A part of the home
bias is because of barriers to international investment.
The international CAPM predicts that individuals should hold equities from
around the world in proportion to market capitalizations. This is predicated on the
assumption that there are no barriers to international investment. In practice,
such barriers do exist, but they are falling overtime, including in India.
45
Empirically, the dominant explanation for international portfolio flows is in
terms of stock returns in dollar terms examine estimates of aggregate
international portfolio flows on a quarterly basis and find evidence of positive,
contemporaneous correlation between inflows and returns. International
investors may have a ‘cumulative informational disadvantage’ relative to local
investors. In response to some new information, local investors may trade in
stocks that results in a price change, and this price change in turn may lead to
international portfolio flows.
There is some evidence that the impact of international portfolio flows on
stock prices depends on whether such flows are ‘expected’ or ‘unexpected’ and
the composition of such investment. For Mexico during the late 1980s through
the crisis of 1993. evidence of unexpected inflows of 1 per cent of market
capitalization driving prices up by as much as 13 per cent.’ unexpected’, not the
‘expected’, inflows correlated with contemporaneous returns.
One of the worries stemming from the informational asymmetries between
foreign investors and domestic investors is the problem of herding and
overshooting. A positive feedback strategy leads to buys (sells) when prices are
rising (falling) and can lead to prices spiraling up (down) and overshooting the
equilibrium, a one-basis-point shock to international portfolio flows generates an
additional 1.5 basis point of additional inflow over the subsequent 45 days.
The data on daily cross-border flows for 44 countries from August 1, 1994
to December31, 1998 , the Asian crisis, and the Russian and long term capital
They find evidence that “All crisis episodes are clearly associated with a strong
attenuation of inflows in general, and of emerging market inflows in particular.
46
It appears that foreign investors held fast during the Mexican crisis, slightly
withdrew some resources in the midst of the Asian crisis, and were hardly fazed
by the Brazilian crisis. Interestingly, the LTCMfailure appears as the only shock
that is associated with strong foreign equity selling. Russia’s devaluation by itself
seems to have left little imprint on flows. By contrast, during theintracrisis
periods, the inflows came rapidly, at an annual rate of approximately 50 basis
points of market capitalization.”
This argument suggests that the gains. The Tequila crisis began with
Mexico’s sudden devaluation in December 1994 and continued through the
spring of 1995, the Asian crisis begins with the Thai devaluation in July 1997 and
continued through the spring of 1998,and the Russian/LTCM crisis occurred in
late summer/fall of 1998 with Russia devaluing in August 1998 andLTCM failing i
financial globalization may be smaller as compared with those predicted by the
ICAPM. This suggests that for India to fully capture these benefits, progress is
needed on issues of corporate governance and the risks of expropriation by the
offer of rationale in favor of capital controls.
FII net inflows in India
Using a monthly data-set for the period May 1993 to December 1999, the
FII net inflows were not only correlated with the return in Indian equity market but
was more likely the effect than the cause of the Indian equity market return. FIIs
did not appear to be at an informational disadvantage compared to domestic
investors in the Indian markets.
Furthermore, the Asian crisis marked a regime shift. In the post-Asian
crisis period, the return in the Indian equity market turned out to be the sole
driver of the FII inflow, while for the pre-Asian crisis period, other covariates
reflecting return in other competing markets were also correlated with FII net
inflow. explored the relationship of daily FII flows to the
47
Indian equity market for the period January, 1999 to May, 2002 with two types of
variables.
The first type included variables reflecting daily market return and its
volatility (representing risk) in domestic and international equity markets, based
on the BSE Sensex, S&P 500 and the MSCI WI, as well as measures of co-
movement of returns in these markets (the relevant betas). The second type of
variables, on the other hand, were essentially macroeconomic like daily return
son the Rupee-Dollar exchange rate, short-term interest rate and index of
industrial production(IIP); variables that are likely to affect foreign investors'
expectation about returns in the Indian equity market.
They distinguished among three kinds of daily FII flows, namely, FII flows
into the country or FII purchases, FII flows out of the country or FII sales, and the
net FII inflows into the country or FII net, and related these to the above
mentioned variables along with their past history over different time frames, like a
week or fortnight.
While, the dependence of net FII flows on daily return in the domestic
equity market at a lag, to be more specific) is suggestive of foreign investors'
return-chasing behavior, the recent history of market return and its volatility in
international and domestic stock markets have some significant effect as well.
However, while FII sale (and FII net inflow) is significantly affected by the
performance of the Indian equity market, FII purchase is not responsive to this
market performance.
. Global factor is the London Inter-bank Offered Rate (LIBOR), which
inversely related to FII inflows. Among domestic factors, lagged stock market
returns, rating downgrades and rupee depreciation affected FII flows adversely.
48
Policy implications that emerge from the studies are that a move towards a
more liberalized regime, in emerging market economies like India, should be
accompanied by further improvements in the regulatory system of the financial
sector.
To fully reap the benefits of capital market integration, in India, the prime
focus should be on improving investor confidence in the equity market so as to
strengthen the domestic investor base of the market, which in turn could act as a
built-in cushion against possible destabilizing effects of sudden reversal of
foreign inflows.“
Findings of several studies on FII flows emerging equity markets over the
world have shown the importance of financial market infrastructure such as the
market size, market liquidity, trading costs, information dissemination, and legal
mechanisms relating to property rights, etc. in attracting foreign portfolio
investments into the emerging markets.”
49
CHAPTER-4
FII’S IN INDIAN
MARKET
50
4.1 Foreign Institutional Investment
Overseas pension funds, mutual funds, investment trust, asset management
companies, nominee companies, banks, institutional portfolio managers,
university funds, endowments, foundations, charitable trusts, charitable societies,
a trustee or power of attorney holder incorporated or established outside India
proposing to make proprietary investments or investments on behalf of a broad-
based fund (that is, fund having more than 20 investors with no single investor
holding more than 10 per cent of the shares or units of the fund).
The primary market deals with the Initial public offerings (IPO) or sales of shares
by companies to the public for the first time. The recent IPO’s that took place in
BSE can be viewed. Once the IPO’s are completed all further transactions of the
sold shares take place in the secondary market, more commonly known as stock
markets or as bourses (jargon in finance).
The major stock exchanges in India are the BSE and the NSE..The National
Stock Exchange or NSE was incorporated in November 1992 as a tax-paying
company unlike other stock exchanges in the country. The NSE’s index is known
as S&P CNX Nifty which is a 50 stock index which covers almost 25 sectors of
the economy.
Bombay Stock Exchange Limited is the oldest stock exchange in Asia. The
Exchange has a nation-wide reach with a presence in 417 cities and towns of
India. The BSE’s index is the SENSEX which is a 30 stock index. The SENSEX
is an acronym for Sensitive index of the BSE. FII flows do have a great impact
even on the common man. The large inflows are often cited by politicians and
media as proof that India is a success story and that global investors are flocking
in their hordes.
51
It should be kept in mind that the so-called `global investor' can be very fickle. He
goes where he perceives profits. If the tide turns, he would be the first to flee with
the profits.
A sharp reversal of fund flows could result in economic and financial instability.
India was relatively immune to the Asian crisis in the mid-1990s as its integration
into the global financial market was not so strong. It may not be so lucky the next
time around. India also needs to focus on long-term flows in the form of foreign
direct investment to sustain the economic reform process
As sub-accounts:
A sub-account is generally the underlying fund on whose behalf the FII
invests. The following entities are eligible to be registered as sub-accounts:
Partnership firms, private companies, public companies, pension funds,
investment trusts, and individuals.
Domestic entity:
A domestic portfolio manager or a domestic asset management company shall
also be eligible to be registered as an FII to manage the funds of sub-accounts.
FIIs can register with SEBI under the following categories:
Regular FIIs – those required to invest not less than 70 per cent of their
investments in equity-related instruments and up to 30 per cent in non-equity
instruments.
.
52
Table 4.1 Trends in FII investment
Period Gross
purchases
(Rs. Mn.)
Gross
Sales
(Rs. Mn.)
Net
Investment
(Rs. Mn.)
Net
investment*
(US $ mn.)
Cumulative
Net
Invetment*
(US $ mn.)
1993-94 55,925 4,663 51,262 1,634 1,638
1994-95 76,310 28,348 47,963 1,528 3,167
1995-96 96,935 27,517 69,420 2,036 5,202
1996-97 155,539 69,794 85,745 2,432 7,634
1997-98 186,947 127,372 59,575 1,649 9,284
1998-99 161,150 176,994 -15,844 -386 8,898
1999-2000 568,555 467,335 101,219 2,339 11,237
2000-01 740,506 641,164 99,340 2,160 13,396
2001-02 499,200 411,650 87,552 1,846 15,242
2002-03 470,601 443,710 26,889 562 15,804
2003-04 1,448,575 990,940 457,645 9,949 25,754
Source : secondary data
Interpretation
It can be observed from the above table that the portfolio investment
inflows have always been on the increase. But the years 2001-02 and 2002-03
saw some reversal in the trend. From a net inflow of US $ 2.1 billion in 2000-01,
such inflows declined to US $ 1.8 billion in 2001-02, and further dropped to US $
0.562 billion in 2002-03.
53
The decline is because of the lower portfolio inflows, The decline witnessed a
sharp reversal in the year 2003-04. FIIs have made a net investment of US $
9969 million during this year registering a growth of 1670% over the previous
year, creating a record in the history of FII investment in India. Gross purchases
in this year registered a growth rate of 208% compared to the year before in
rupee terms. This trend continued in April 2004, only to suffer reversal again
during May and June 2004, when the net investment became negative.
Graph 4.1 Trends in FII Investments
Trends in FII investments
-200000
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
years
FII
In
vest
men
ts
54
55
Table 4.2 FII’s shareholding as of September 30, 2004
FIIs shareholding as a per cent
of total outstanding shares
Number of companies
0-1 234
1-5 74
5-10 51
10-15 46
15-20 32
20-25 20
25-30 6
30-35 0
35-40 2
40-45 1
45-50 1
50-55 1
55-60 0
60-65 1
Source: Secondary data
Interpretation
Average total traded value for all Nifty stocks is approximately 77 per cent of
the traded value of all stocks on the NSE. Nifty stocks represent about 61 per
cent of the total market capitalization as on August 31, 2004.
56
Graph 4.2 FIIs shareholding as of September
FII's share holdings in 2004
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
Months
Sh
areh
old
ing
s
0
50
100
150
200
250
No
of
com
pan
ies
Table 4.3 t test results
N Mean Standard deviation
t value
Nifty Companies
50 16.9278 12.8318 6.934#
Non-Nifty Companies
419 4.1476 6.6009
# p < 0.05
Source: Secondary data
Interpretation
Analysis was done to see if Nifty and non Nifty companies differe in their FII
investments. Thus we can conclude t test the calculated value is significant at
5% level of significance
57
Ho : there is no significance difference between Nifty and non Nifty companies
in their FII investments
H1: There is significance difference between Nifty and non Nifty companies in
their FII investments
There fore Null hypothesis is rejected
Table 4.4 Shareholding Pattern in Nifty Companies as of September 2004
Companies FIIs Shareholding
(in mn.)
Total outstanding
shares
(in mn.)
FIIs Shareholding
as a % of total
outstanding
shares
NIFTY 3,227 23,285 13.85
Non-NIFTY 1,508 35,060 4.30
Total 4,735 58,345 8.12
Source: Secondary data
Interpretation
The table above shows that the FIIs investment is certainly more
concentrated in the Nifty companies than in Non-Nifty companies. The FIIs
shareholding is around 13.85 per cent in Nifty companies as against 4.30 per
cent in the Non-Nifty companies. This analysis is not complete, though the
shareholding of the FIIs as a per cent of the total outstanding shares of the
company makes it comparable with similar figures for other companies, it does
not indicate the amount of FIIs investment in each of these companies in relation
to others.
58
This is because a mere comparison of the number of shares held by FIIs
is meaningless as the market price per share varies across companies and it
takes different quantum of money to acquire the same number of shares in
different companies. Hence, this analysis is further extended to include the
monetary value of the FIIs investment as of September 30, 2004.
Graph 4.4 Shareholding Pattern in Nifty Companies as of September
2004
0
10000
20000
30000
40000
50000
60000
companies
total outing shares
FII share holdings
50000-60000
40000-50000
30000-40000
20000-30000
10000-20000
0-10000
59
Table 4.5 Value of FIIs Investment
Category FIIs Shareholding
(Rs. mn.)
FIIs Shareholding as a
percentage of the total
value
Nifty 1,328,556 85.16
Non-Nifty 231,520 14.84
Total 1,560,076 100
Source: secondary
Interpretation
The shareholding of FIIs is analyzed in terms of the market value of their
investment as of September 30, 2004, about 85 per cent of the total value of their
investment is held in Nifty companies and only about 15 per cent is in Non-Nifty
companies. A separate analysis of the Nifty and Non-Nifty companies bears
evidence to this fact. The investment is about 14 and 12 per cent respectively.
50 per cent of the total market value of the FIIs investment is only in 6 companies
namely Infosys Technologies (13.87%), Reliance Industries (12.44%), ICICI
Bank (7.51), HDFC (7.05), ONGC (5.25%) and Satyam (4.88). The total value of
the FIIs investment in these companies is around Rs.677,516 million .
60
Graph 4.5 Value of FIIs Investment
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
FII's shareholding
category
Value of FII Investment
1400000-1600000
1200000-1400000
1000000-1200000
800000-1000000
600000-800000
400000-600000
200000-400000
0-200000
Table 4.6 Cap and Gap Analysis of FIIs Investment
Category Total
outstanding
shares
Permissible
Investment
for FIIs (Cap)
FIIs
shareholding
Gap
Available
for
Investment
All
Companies
58,345 17,123 4,734 12,389
Nifty 23,285 7.937 3,227 4,711
Non-Nifty 35,060 9,186 1,508 7,678
Source: secondary data
61
Interpretation
The percentage of the investment gap in case of Nifty companies is
around 59 and it is 84 for the Non-Nifty companies. The total gap in respect of all
the companies works out to 72 per cent. FIIs investments in Nifty companies is
higher than in Non-Nifty companies, both in terms of number of shares held by
them and the market value of these shares. FIIs investment cap is not uniformly
the same figure for all the companies
Graph 4.6 Cap and Gap Analysis of FIIs Investment
Cap & gap analysis of FII
0
10000
20000
30000
40000
50000
60000
70000
cap/Gap available for investment
tota
l o
uti
ng
sh
are
s
Table 4.7 Gap in Market Value
Category Gap Available for
Investment
(in mn.number of shares)
Gap in Market Value#
(Rs. in mn.)
All Companies 12,389 2,711,522
Nifty 4,711 1,338,886
Non-Nifty 7,678 1,372,637
Source: secondary data
Interpretation
62
The above table shows the number of shares available for further
investment by FIIs is less in Nifty companies than Non-Nifty companies, in terms
of value the difference is not very wide as the average market price per share of
the Nifty category, is very much higher than that of the Non-Nifty category.
The top 5 companies where the gap is at the maximum in Nifty category of
companies are Bharti Televentures, Reliance Industries, ONGC, Hindustan Lever
and Wipro. In the Non-Nifty companies the top 5 companies are Mphais BFL,
Neyveli Lignite, LIC Housing Finance, Tata Teleservices(Maharastra) and
Himachal Futuristic.
Graph 4.7 Gap in Market Value
Gap analysis of FII's at market value
0
1000000
2000000
3000000
4000000
5000000
6000000
gap in market value
Table 4.8 Trading Strategy of FIIs
63
Period Gross
Purchases
(Rs. Crores)
Gross Sales
(Rs. Crores)
Ratio of Gross
Sales/Gross
Purchases(per
cent)
January 2004 16830.20 13653.50 81
February 2004 14952.10 12555.00 84
March 2004 17238.20 11633.90 67
April 2004 19691.50 12053.30 61
May 2004 15531.60 18778.10 121
June 2004 10633.50 10116.80 95
July 2004 11096.20 10182.80 92
August 2004 12594.80 9702.30 77
September
2004
12385.10 9999.80 81
Source: secondary
Interpretation
This Table Shows the Trading strategy of FII from January 2004 o September
2004 through gross purchases & gross SalesGraph
Graph4.8Trading strategy of FII’s
Trading Strategy of FII's
0
20000
40000
60000
80000
100000
120000
140000
160000
64
TABLE 4.9 FII Net Investments in different years
Year Jan Feb Mar
1996 138 1613 1089
1997 340 424 484
1998 -375 628 472
1999 370 384 204
2000 184 2727 1360
2001 3872 1574 2265
2002 378 2024 484
2003 1088 433 283
2004 2483 3183 8812
2005 1324 7484 7888
2006 6177 7600 1800
Source: secondary data
Interpretation
The above table shows the FII net Investments and compared that to
monthly performance of the S&P Nifty 50 index there is lot of difference in
each month
Graph 4.9 FII Net Investments
65
-2000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
FII net investments in each year
Table 4.10 Gap Available for investments
Category Total
outstandi
ng
Shares
Permissible
Investment
for
FIIs (Cap)
FIIs shareholding Gap
Available for
Investment
All
Companies
58,345 17,123 4,734 12,389
66
NIFTY 23,285 7.937 3,227 4,711
Source: secondary data
Interpretation
The above table shows the percentage of the investment gap in case of
NIFTY companies is around 59 and is 84 for the Non-NIFTY companies. The
total gap in respect of all the companies works out to 72 per cent. where it is
brought out that the FIIs investments in NIFTY companies is higher than in Non-
NIFTY companies
Graph 4.10 Gap Available for investments
67
Gap available for investment
0 10000 20000 30000 40000 50000 60000 70000
1
2
3
4
5
6
7
Table 4.9 Gap Available forInvestment
Table 4.9 FIIs shareholdingInvestment for
Table 4.9 PermissibleInvestment for
Table 4.9 Total outstandingShares
Table 4.9 Category
68
Table 4.11 Gap Analysis of FII’s Investment at Market Value
Category Gap Available for
Investment
(in mn.number of
shares)
Gap in Market
Value#
(Rs. in mn.)
All Companies 12,389 2,711,522
NIFTY 4,711 1,338,886
Non-NIFTY 7,678 1,372,637
Source: Secondary data
Interpretation
In the above table number of shares available for further investment by
FII’s is less in NIFTY companies
Graph 4.11 Gap Analysis of FIIs Investment at Market Value
69
gap in market value
Category
All Companies
NIFTY
Non-NIFTY
5.1FINDINGS
70
India opened its stock markets to foreign investors in September 1992
It as received considerable amount of portfolio investment from foreigners
in the form of Foreign Institutional Investor’s (FII) investment in equities
FII’s have been permitted to purchase shares/convertible debentures of an
Indian company through offer / private placement.
Eligibility to obtain an FII license a fund must be "broad-based" -that is, it
must have at least twenty individual investors with no single investor holding
more than 10 percent of the funds outstanding shares.
FII’s are also permitted to trade in all exchange traded derivative contracts
subject to certain limits.
FII’s are not permitted to invest in Print Media Sector through FDI or PIS
routes. Investment by FII requires prior approval of Government of India.
FII’s have been permitted to purchase shares/convertible debentures of an
Indian company through offer / private placement. It is clarified that a FII
may invest in a particular issue of an Indian company
.
71
5.2 SUGGESTIONS
A foreign investor that meets certain eligibility criteria must obtain approval
as an FII from both SEBI and the Reserve Bank of India, and must renew
its license every five years.
If the FII’s investments could concentrate in a large number of companies
the market value will raise
FII must be increased in india
72
5.3 CONCLUSION
The foreign institutional investments in India after the initiation of
economic reforms in the early 1990s, the movement of foreign capital flow
increased very substantially. This increase in capital movement could have a
very significant impact on the domestic real economy.
There is great need to monitor the behavior of these flows so as to
minimize possible adverse impacts on the real economy. For this purpose, we
need to be aware of the determinants of foreign capital, rather than what
influences this capital to cross borders. The present study examines the
determinants of foreign institutional investments in India.
Foreign institutional investors (FII’s) were net sellers from November 1997
through January 1998. The outflow, prompted by the economic and currency
crisis in Asia and some volatility in the Indian rupee, was modest compared to
the roughly dols 9 billion which has been invested in India by FII’s since 1992.
Foreign institutional investors (FII’s) were net sellers from November 1997
through January 1998. The outflow, prompted by the economic and currency
crisis in Asia and some volatility in the Indian rupee, was modest compared to
the roughly dolls 9 billion which has been invested in India by FII’s since 1992.
Every year since FII’s were allowed to participate in the Indian market, FII
net inflows into India have been positive, except for 1998-99. This reflects the
strong economic fundamentals of the country, as well as the confidence of the
foreign investors in the growth with stability of the Indian market. The year 2003
marked a watershed in FII investment in India. FII’s started the year 2003 in a big
way by investing Rs. 985 crore in January itself.
73
BIBLIOGRAPHY
REFERENCES
Agarwal, R. N. 1997. “Foreign Portfolio Investment in Some Developing
Countries
Chakrabarti Agarwal, R. N. 1997. “Foreign Portfolio Investment in Some
Developing Countries
, Rajesh. 2001. “FII Flows to India,
Journals
Trivedi, Pushpa, and Abhilash Nair. 2003. “Determinants of FII Investment
Inflow to India.”
Icfai pushpa Trivedi and Abihilash Nair
Web sites
www.business Line .com
www.google.com
www.economic times.com
www.indiatines.com
74