DISSERTATION REPORT ON

Impact of Institutional Investors on Nifty Volatility With Special Reference To Foreign Institutional Flows and Mutual Fund FlowsThis dissertation report is being submitted as part of the requirements of the MBA Programme of Bangalore University.

Submitted ByPavan Kumar Puthraya

Reg. No. 03VWCM6074

With the guidance and support ofProf. S.P.Srinivasan Faculty, Alliance Business Academy

ALLIANCE BUSINESS ACADEMY BANGALORE 560 076 Batch: 2003-2005

CERTIFICATE

This is to certify that Mr. Pavan Kumar Puthraya of our Institute has completed Dissertation work on Impact Of Institutional Investors on Nifty Volatility With Special Reference To Foreign Institutional Flows(FII) and Mutual Fund Flows(MF) under my guidance.

Prof. S.P.Srinivasan

DECLARATIONI Pavan Kumar Puthraya, studying in Alliance Business Academy, Bangalore do hereby declare that this Dissertation Report on Impact of Institutional Investors on Nifty Volatility with special reference to FII flows and MF Flows has been prepared by as part of the requirements of the MBA Program of Bangalore University (Batch of 2003 2005). My guide for the training has been Prof. S.P.Srinivasan

I further declare that this Dissertation report has not been submitted earlier to any other University or Institute for the award of any Degree or Diploma.

Pavan Kumar Puthraya Reg. No: 03VWCM6074Date: Place: Bangalore

ACKNOWLEDGEMENT

I wish to express my deep sense of gratitude to Dr. Sudhir Angur, President, Alliance Business Academy and Prof. B V Krishnamurthy, Director and Executive Vice President for providing me the opportunity to carry out my dissertation work successfully.

I also consider it as a great honour to express my heartful gratitude to my guide Prof. S.P. Srinivasan for his kind support, advice and encouragement from the beginning of the dissertation work till the completion of the dissertation report.

Last, but not least I would like to express my deep sense of gratitude and thanks to my parents, who have taken pains in bringing me up to this stage of education.

TABLE OF CONTENTSChapter No 1 2 3 Topic Theoretical background of the Study Design of the study Profile Page No

01 02

3.1 3.2 3.3 3.4 3.5 3.6 3.6 3.7 3.8 3.9 3.10 3.114

Institutional Investors Foreign Institutional investors Investment structure of FII Regulation relating to FII operation Categories of FII Mauritius route taken by FIIs FDI v/s FPI Recent trends in foreign investment Mutual Funds National Stock Exchange (NSE) FII and Indian Stock market MF and Indian Stock marketAnalysis of Data

06 13 15 16 21 23 25 26 27 31 35 39

4.1 4.25 6 7 8

Correlation and Regression Analysis Asset allocation analysis of MF schemes Summary of Findings and Recommendations Conclusion Bibliography Annexure

41 44 50 53 54 55

LIST OF TABLES

TABLE NO

TITLE

PAGE NO

12 3 4 5

Net capital flows to developing countries FII investment in India Trend of FII activities in India Net Mutual Fund inflow into Stock Exchange Composition of S&P CNX Nifty

08 10 11 30 33

LIST OF GRAPHS

GRAPH NO 1 2 3 4 5 5 6 7

TITLE Net capital flows to developing countries FII investment in India Trend of FII activities in India Net Mutual Fund inflow into Stock Exchange MF flows and CNX madcap FII Inflow and Nifty Index MF Flows and Nifty index FII Flow and MF Flow

PAGE NO 8 11 12 30 46 47 48 49

EXECUTIVE SUMMARYThe Indian stock market though one of the oldest in Asia being in operation since 1875, remained largely outside the global integration process until the late 1980s. In line with the global trend, reform of the Indian stock market began with the establishment of Securities and Exchange Board of India in 1988. Among the significant measures of integration, portfolio investment by FIIs allowed since September 1992, has been the turning point for the Indian stock market. As of now FIIs are allowed to invest in all categories of securities traded in the primary and secondary segments and also in the derivatives segment.

The process of integration received a major impetus when the Indian corporate was allowed to go global with GDR / ADR issues. Starting with the maiden issue of Infosys in March 1999, ADR issues has emerged as the star attraction due to its higher global visibility. Thus, the Indian stock market, which was in isolation until recently, turns out to have been sensitive to developments in the rest of the world by the end of the 1990s.

The dissertation work aims to study the impact of Institutional Investors on the Nifty. Even though there are several institutional investors, only the FII and MF operations are considered. The other institutional investors do not participate actively in the stock market because of various restrictions. The analysis of the data is done by taking daily net inflows of FII and MF. These inflows are compared with the daily Nifty closing prices.

The important finding from this study is that Nifty is influenced by the FII inflows to a considerable extent. The mutual funds are not actively participating in the index stocks. A larger portion of the equity fund investment of mutual fund is seen in the non-index and midcap sector. This means that FII are playing in the index and blue chip stocks and mutual funds in non-index and midcap sector.

The domestic institutional investors have to play an active role in the stock market so as to bring the stability in the stock market. The stability of the stock market is important indicator of the economic development.

1. BACKGROUND OF THE STUDYThe financial markets have expanded and deepened rapidly over the last ten years. The Indian capital markets have witnessed a dramatic increase in institutional activity and more specifically that of FIIs. This change in market environment has made the market more innovative and competitive enabling the issuers of securities and intermediaries to grow.

In India the institutionalization of the capital markets has increased with FIIs becoming the dominant owner of the free float of most blue chip Indian stocks. Institutions often trade large blocks of shares and institutional orders can have a major impact on market volatility. In smaller markets, institutional trades can potentially destabilize the markets. Moreover, institutions also have to design and time their trading strategies carefully so that their trades have maximum possible returns and minimum possible impact costs.

Some studies do examine the trading strategies and price impact of foreign institutional trades; however, the scope is often limited to a single country. This study takes a look at the impact of FII cash flows on Index volatility in India. FIIs are the largest investors in the Indian stock market. But the common perception that domestic investors lack marketmoving influence is not entirely based on fact. If one considers the transactions by domestic mutual funds (MFs) in the equity market an indicator of domestic investor participation in the stock market, domestic investors have been active participants in recent times.

For the study purpose the daily volatility in cash flows of FIIs were analysed in relation to the daily volatility in the National Stock Exchange of India benchmark Index (NIFTY) from Jan.2001 to Dec.2004. This was done using Correlation analysis and Regression Analysis.

1

2. DESIGN OF THE STUDY2.1 Statement of the Problem: The stock market is influenced by many factors. Both institutional and individual investors have a critical role to play in the stock market. The volatility in the market is the result of buying and selling pressure on the stocks. The excessive buying pressure results in the bull market and the excessive selling pressure result in bear market. Under this circumstance it may be useful to study the impact of institutional investors on the market. This study basically aimed at studying the influence of FII and mutual Fund on one of the premier stock exchange of India, NSE India.

2.2 Objective: To study the impact of Institutional Investors with special reference to FII Cash flows and Mutual Fund flows, on the stock market volatility. This can be further explained as higher the variability of the FII cash flows, higher will be the volatility of the Index.

2.3 Scope of the Study: The scope of the study is limited only to NSE Nifty. The study includes testing the impact of Institutional Investors only on NSE Nifty. The scope of the study is limited only to two institution investors namely FIIs and MFs. The other institutional investors have not been considered in the study as they do not participate actively in the stock market because of various restrictions imposed on their operations.

2.4 RESEARCH METHODOLOGY2.4.1 Type of research: Analytical study and Correlation-Regression Analysis

2.4.2 Sources of data: www.nseindia.com www.indiainfoline.com www.myiris.com www.mutualfundsindia.com 2

2.4.3 Research Instruments: Correlation Regression Durbin-Watson study

2.4.4 Hypothesis 1 Ho : There is a significant impact of FII Cash flows on the stock market volatility H1 : There is no significant impact of FII Cash flows on the stock market volatility

Hypothesis 2 Ho : There is a significant impact of MF flows on the stock market volatility H1 : There is no significant impact of MF flows on the stock market volatility

2.4.5 Plan of Analysis For the study purpose, only NIFTY that is the National Stock Exchange (NSE) benchmark Index is considered. This is because the larger chunk of FII activity in India happens on the NSE. NSE is the dominant exchange in India with close to 75% of cash market turnover and well over 90% of derivatives turnover in India happening on the NSE. The daily index volatility and volatility in daily FII cash flows were studied. We have also studied the combined effects of daily Mutual Fund (MF) and daily FII volatility on the Nifty volatility. The data considered for the study is daily data for four years i.e. from January 2002 to December2004. This period also captures some of the great peaks and falls of the Indian market. Moreover this period captures the significant development in the financial markets in India like introduction of rolling settlements, derivatives etc.

Statistical models used:y y y

Standard Deviation as a measure of risk Correlation and regression analysis Durbin-Watson Statistical Model

3

For the analysis purpose primarily two variables were chosen. They are Daily FII Cash flows and Daily Nifty values. Of these two variables, FII Cash flows is the independent variable and Index (Nifty) is the dependent variable. For the analysis purpose only net cash flows were considered i.e. total purchase total sales during the intra-day period.

FII Cash flow is the independent variable. However Index is affected by various factors including liquidity and hence is the dependent variable. We have also studied the combined effect of another independent variable namely volatility of daily MF flows combined with daily FII volatility on Nifty volatility.

2.5 Definitions Volatility Volatility is a measure of the range of an asset price about its mean level over a fixed amount of time. It follows that volatility is linked to the variance of an asset price. If a stock is labeled as volatile then the price will vary greatly over time. Conversely, a less volatile stock will have a price that will deviate relatively little over time. Since volatility is associated with risk, the more volatile that a stock is, the more risky it is. Consequently, the more risky a stock is, the harder it is to say with any certainty what the future price of the stock will be.

Computing the Volatility The estimation of volatility comes from a mathematical model of stock prices. The mathematical model we will use is based on three assumptions about stock prices and their movements.y y

The first assumption that we will be using is that volatility is constant. The next assumption is that stock prices cannot be negative; once a stock price reaches $0 it cannot go any lower.

y

The third assumption is that the price of a stock is a normal random variable.

Thus volatility is calculated as standard deviation as it is the standard measurement device used worldwide to calculate the volatility.

4

Standard deviation is a statistical term that provides a good indication of volatility. It measures how widely values (closing prices for instance) are dispersed from the average. Dispersion is difference between the actual value (closing price) and the average value (mean closing price). The larger the difference between the closing prices and the average price, the higher the standard deviation will be and the higher the volatility. The closer the closing prices are to the average price, the lower the standard deviation and the lower the volatility.

Where; n number of observations, _ X - mean of observations, Xi I th observation.

Durbin Watson Statistic Analysis The Durbin Watson Statistic gives that there is significant positive autocorrelation between the two independent variables that are FIIs and Mutual Funds Cash Flows.The test statistic is calculated by

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3. PROFILE3.1 INSTITUTIONAL INVESTOR A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions is an institutional investor. Institutional investors face less protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves.

INSTITUTIONAL INVESTORS 1. Foreign Institutional Investors 2. Mutual Funds 3. Financial Institutions 4. Insurance Companies 5. Banks

3.1.1 HISTORY FOREIGN PORTFOLIO INVESTMENT FPI was traditionally been concentrated in developed markets. But now it has been shifting to the new merging capital markets. The emerging markets have at least three attractive qualities, two of which are their high average returns and their low correlation with developed markets. Diversification into these markets is expected to give higher expected returns and lower overall volatility.

Many individual investors, as well as portfolio and pension fund managers, are reexamining their basic investment strategies. During the 1990s, fund managers realized that significant performance gains could be obtained by diversifying into high -quality global equity markets. These gains are limited, however, by the fairly high crosscorrelations returns in these markets.

Broadly speaking, there are six groups of investors in the emerging markets, each having a tolerance for different risk and return:

6

1. Domestic residents of developing countries with overseas holdings and other private foreign investors, who constitute the dominant category of portfolio investors who are currently active in the major emerging markets. These investors keep abreast of developments in their country on a regular basis and monitor change in government policy. Their investments in emerging markets are motivated by expected short-term yields. Preference is given to instruments that are in bearer form and provide returns in hard currency. 2. Managed Funds (closed-end country funds and mutual funds), whose portfolio managed buy and sell shares and high-yield bonds in one or more of the emerging markets for performance-based trading purposes. 3. Foreign banks and brokerage firms, who allocate their portfolio for inventory and trading purpose 4. Retail clients of Eurobonds houses who are involved in emerging securities markets due to portfolio diversification motives. They are generally interested in high-yield, high-risk portfolio investment in the emerging markets. 5. Institutional Investors (such as pension funds, life insurance companies) who have a longer time horizon for expected gains from their portfolio and look for stability and long term growth prospects in the market in which they invest. 6. Non resident nationals of developing countries, who could be a potential source of portfolio investment from abroad.

3.1.2 FOREIGN INVESTMENT Foreign capital flows have come to be acknowledged as one of the important sources of funds for economies that would like to grow at a rate higher than what their domestic savings can support. Foreign capital flows have particularly become prominent after the advent of globalization that has led to widespread implementation of liberalization programmes and financial reforms in various countries across the globe in 1990s. This resulted in the integration of global financial markets. As a result, capital started flowing freely across national borders seeking out the highest rate of return. The net capital flows to developing countries which were at US $ 86.6 billion in 1990 have seen a steady growth over time and are at US $ 228 billion in 2003 representing about 3.6% of the 7

nominal gross domestic product of developing countries. (Global development finance 2004) Initially these capital flows were mainly in the form of syndicated bank loans. But, in recent years the debt flows have gradually been replaced with Foreign Direct Investment (FDI) flows and portfolio flows to a great extent.

Table No 1 Net capital flows to developing countries Year 1970 1980 1990 2000 2001 2002 2003 FDI 2.2 5.3 24.1 160.6 175 147.1 135.2 Portfolio Equity Flows -------4.5 26 4.4 4.9 14.3 Debt 6.4 96 58 -1 -1.2 7.3 44.3

Graph No 1Ne200 180 160 140 120 100 80 60 40 20 0 -20 1970 1980 1990 2000 Year 2001 2002 2003 FDI Portfolio Equity Flow s Debt

ap a F ws

e e p

r es (U $

)

The portfolio flows were virtually non-existent till 1970s. They made a modest beginning in 1980s and assumed significant proportions only in 1990s. They reached a peak in the period prior to the East Asian crisis, but remained subdued thereafter. Though the

8

portfolio flows towards developing countries have always been smaller than the FDI flows, they have always been positive from 1990. In fact, the portfolio flows have registered a substantial increase in the year 2003 and have gone up by more than four fold compared to the previous year.

Foreign capital flows to IndiaTill the beginning of 1991, India had a highly regulated financial system with a restrictive foreign exchange regime. The country had a closed capital account and the mobility of capital was restricted through administrative controls. In 1991 India suffered a balance of payment crisis and had to devalue the currency. Since it was also faced with the worldwide declining trend in the availability of official assistance, India embarked on economic reforms to transform the controlled economy into a market driven one. This included the financial liberalization strategies like dismantling of capital controls, reforms in trade and investment policies and so on to integrate the Indian financial markets with the global financial markets. All these reforms opened the floodgates to foreign capital flows into the country. The total net capital flows have risen to US $ 12.1 billion in 200203 from US $ 7.1 billion in 1990-91. The cross border flows are averaging around US $ 10 billion every year currently. Like elsewhere in the globe, the nature of capital flows has witnessed a transformation over time in India also. The non-debt creating capital flows have come to constitute a higher percentage of the total capital flows. The ratio of non debt creating inflows to debt creating inflows was 1.5 to 83.3 in 1990-91 as against 44.6 to 6.6 in 2002-03. The portfolio flows have been one of the major forces that has changed the quantum and nature of international capital flows to India. Portfolio flows include the investment in ADRs/GDRs and offshore funds in addition to investment by Foreign Institutional Investors (FIIs).

Prior to 1992, only non-resident Indians (NRIs) and Overseas corporate bodies (OCBs) were allowed to undertake portfolio investment in India. Only on September 14, 1992 the Government of India issued guidelines on FII investments in India which was followed by a notification by Securities and Exchange Board of India (SEBI) three years later in 9

November 1995. Ever since the opening up of the market for FIIs, the net investments by FIIs have always been positive every year except in the year 1998-99 where the net investment was negative primarily because of the uncertainty that prevailed after India tested a series of nuclear bombs in May 1998 and the imposition of the economic sanctions by the United States, Japan and other industrialized countries. On an average India has received cross border portfolio investment of around US $ 2.2 billion per year between 1992-93 and 2002-03 of which close to US $ 1.2 billion per year on an average is the share of FIIs. The cumulative FII investment in India is around US $ 19 billion and the FII investment in India account for over 10 per cent of the total market capitalization of the Indian stock market. The investments by FIIs have been registering a steady growth since the opening of the Indian capital markets in September 1992. That this trend has come to stay is evident from the fact that the FIIs investment in equity and debt markets amounted to Rs.130 billion in the first quarter of calendar 2004, nearly 447% higher than Rs.24 billion in the corresponding period of calendar 2003. Equity investments by FIIs amounted to Rs.112 billion between January and March 2004 as compared with Rs.17 billion in the corresponding period last year. The equity investments by FIIs in the first quarter of calendar 2004 are close to 50% of the total equity investments worth Rs.244 billion made in the year 2003.

Table 2 FII investment in India Year 1992-93 1999-00 2000-01 2001-02 2002-03 Total portfolio Flows 244 3026 2760 2021 979 FII 1 2135 1847 1505 377 GDRs / ADRs 240 768 831 477 600 Offshore Funds 3 123 82 39 2

10

Graph No 2FII In3500 3000 2500 2000 1500 1000 500 0 1992-93 1999-00 2000-01 2001-02 2002-03 Offsh e F

n in Indi U

n

GDRs / DRs FII

Table No 3 Table showing Trend OF FII activities in India Year 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 Purchases (Rs mn) 390,393 1,856,720 944,120 464,790 517,792 747,907 364,303 138,998 189,265 157,392 66,659 92,672 26,619 Sales (Rs mn) 302,064 1,467,070 639,535 428,498 386,510 684,211 298,630 153,797 127,192 49,356 28,122 24,761 668 Net (Rs mn) 88,329 389,650 304,585 36,292 131,284 63,697 65,672 -14,799 62,073 108,036 38,538 67,912 25,951 Net (US$ mn) 2,012 8,519.40 6,594.60 752.9 2,807.30 1,461.40 1,534.80 -338 1,746.70 3,058.20 1,191.40 2,164.80 827.2

s

11

Graph No 3FII Investment in India(Rs mn)450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 -50,000 1993 1994 1995 1996 1997 1998 1999Year

2000

2001

2002

2003

2004

2005

3.1.3 Source of FII flow 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). 1. US-based institutions accounted for slightly over 41% 2. UK constitute about 20% 3. Western European countries hosting another 17% of the FIIs 4. The remaining 22% by other countries

It is, however, instructive to bear in mind that these 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

12

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.

Factors affecting FII flowsFII flows and stock returns: FII flows depend on the performance of the stock exchange of the country. The EPS of the stock exchange of the country is one of the important factors which have a bearing on the FII flows in to the country. The FIIs study the average EPS of various countries stock exchange and invest in the profitable ones. The specific return of specific stocks also influences the FII decisions.

Country risk measures: This includes political and other risks in addition to the usual economic and financial variables, which may be expected to have an impact on portfolio flows to India though they are likely to matter more in the case of FDI flows.

3.2 FOREIGN INSTITUTIONAL INVESTOR The term Foreign Institutional Investor is defined by SEBI as under: "Means an institution established or incorporated outside India which proposes to make investment in India in securities. Provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor."

3.2.1 SUB ACCOUNT Sub-account" includes those institutions, established or incorporated outside India and those funds, or portfolios, established outside India, whether incorporated or not, on whose behalf investments are proposed to be made in India by a Foreign Institutional Investor.

13

3.2.3 FOREIGN INVESTMENTS IN INDIAN CAPITAL MARKETS Indias decision in 1991 to permit Foreign Institutional Investors (FIIs) to invest in India was a major step in the globalization of Indian capital market. FIIs have played a major role in Indias secondary markets and have virtually re written the rules of the market in recent years. FIIs drive the stock market, especially in technology and media stocks, using international valuation models and even linking NASDAQ trends with Indian market capitalization values. The Reserve Bank of India monitors FII activity in a daily basis.

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. Foreign Investors (whether registered as a FII or not) can also invest in Indian securities outside the FII route. Such investments require case-by-case approval from the Foreign Investment Promotion Board in the Ministry of Industry and Reserve Bank of India (RBI), or only by the RBI depending on the size of the investment and the industry in which this investment is to be made.

FII investments in Indian capital market are 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, because of the new economy boom and excellent functioning of Stock Exchanges in the Country. The combined daily turnover of National Stock Exchange (NSE) and The Stock Exchange, Mumbai (BSE) is in excess of US $ 30,000 million. The screen base trading of NSE and BSE provides transparency in execution of orders, settlement & trade guarantees and elimination of risk of bad deliveries (in case of dematerialized shares, which constitute over 90% of trade). 14

3.3 INVESTMENT STRUCTURE OF FII INVESTING

Investment Structure of FII

Typical Structure of FII investing Investment in securities Earning income from

dealings in securities Investment decision taken outside India and instructs GC & Broker Coordinates investments

FII

Inves ent Advisor Evaluates investment

made in various jurisdictions Ensures instructions are carried out through LC

Global Cus odia

opportunities for FII Advises FII to buy and sell particular securities

Opens and maintains foreign currency and

Local Cus odia

Rupee A/cs for the FII Opens and maintains Demat A/c for FII Interacts with Broker in accordance with

instructions received from GC/FII Ensures stocks are delivered on sale and

received on purchase Buys/sells securities on

behalf of FIIs as per instructions received from FIIPricewaterhouseCoopers

BrokerPage 8 18 May 2005

15

3.4 REGULATION RELATING TO FII OPERATION

Regulations Regarding Portfolio Investments by Foreign Institutional Investors (FIIs) Investment by FIIs is regulated under SEBI (FII) Regulations, 1995 and Regulation 5(2) of FEMA Notification No.20 dated May 3, 2000. SEBI acts as the nodal point in the entire process of FII registration. FIIs are required to apply to SEBI in a common application form in duplicate. A copy of the application form is sent by SEBI to RBI along with their 'No Objection' so as to enable RBI to grant necessary permission under FEMA. RBI approval under FEMA enables an FII to buy/sell securities on stock exchanges and open foreign currency and Indian Rupee accounts with a designated bank branch. FIIs are required to allocate their investment between equity and debt instruments in the ratio of 70:30. However, it is also possible for an FII to declare itself a 100% debt FII in which case it can make its entire investment in debt instruments. FIIs can invest in listed and unlisted securities including shares, debt instruments dated Government Securities and Treasury Bills. No individual FII/sub-account can acquire more than 10% of the paid up capital of an Indian company. All FIIs and their sub-accounts taken together cannot acquire more than 24% of the paid up capital of an Indian Company. Indian Companies can raise the above mentioned 24% ceiling to the Sectoral Cap / Statutory Ceiling as applicable by passing a resolution by its Board of Directors followed by passing a Special Resolution to that effect by its General Body Presence of Sectoral Cap/ Statutory ceiling means that foreign investment from all sources cannot exceed a specified level. A Company to which no sectoral cap/statutory ceiling is applicable can raise the limit of permissible FII investment to 100% of the paid up capital. A Company to which a 49% cap is applicable can raise the limit of permissible FII investment to 49% and if there is an existing foreign direct investment of 15%, possible FII investment can only be up to 34%.

16

No permission from RBI is needed so long as the FIIs purchase and sell on recognized stock exchange. All non-stock exchange sales/purchases require RBI permission. In order to ensure that the sectoral / statutory ceilings on foreign investment in a company are not violated due to investment by FIIs, RBI monitors these ceilings for the companies in respect of which sectoral caps /statutory ceiling have been indicated by Government of India. When the total holdings of FIIs reaches within 2% of the applicable limit, Reserve Bank issues a notice to all concerned that any further purchases of the shares of the said Company requires prior approval of RBI. High Net worth Individuals /foreign corporates can invest through SEBI Registered FIIs subject to a sub-limit of 5% each within the aggregated limit of 24%. Registered Foreign Institutional Investors (FIIs) are allowed to trade in all exchange traded derivative contracts approved by SEBI from time to time subject to the limits prescribed by SEBI.

3.4.2 Eligibility Criteria to be fulfilled by the Applicant Seeking FII Registration As per Regulation 6 of SEBI (Foreign Institutional Investors) Regulations, 1995, Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration: Applicant should have track record, professional competence, financial soundness, experience, general reputation of fairness and integrity; The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor. The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India. Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment. The applicant must be a "fit and proper" person.

17

The applicant has to appoint a local custodian and enter into an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions. Effect Payment of registration fee of US $ 5,000.00.

InvestmentsForeign corporate and foreign individuals are eligible to make investments only through the equity route. The equity investment route permits upto 30% investments in debt instrument. At least 70% of the investments have to be parked in equity related instruments which include:y y

Securities in primary and secondary markets (listed or unlisted) Units of scheme floated by Unit Trust of India and other domestic mutual funds (listed or unlisted)

y

Warrants and derivative instruments

FIIs and the Sub-Accounts are permitted to tender their securities directly in response to open offer made in terms of the SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997. FII and the Sub-Accounts are also permitted to offer their shares in case of buyback of securities and also to lend securities through an approved intermediary.

Investment limits:y

A FII or a Sub-Account can hold upto 10% of paid up equity capital of any company.

y

The total investments made by all the foreign corporates and foreign individuals shall not exceed 5% of total issued capital of that company within the aggregate limit for FII portfolio investments.

y

The total investments by FII and Sub-Accounts in any Indian Company cannot exceed 24% of its total paid up capital.

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y

However, in certain companies, which have passed a Special Resolution in this regard, the total FII investment can be made up to 49% of the paid up capital. This limit of 24% / 49% is exclusively available for investments by FII only.

y

It may further be noted that this limit of 24% does not include investments made by FII outside the Portfolio investments route i.e., through the direct investment approval process. Investments made offshore through purchases of GDR, ADR and convertibles are also excluded.

3.4.3 Portfolio Investment by Foreign Institutional InvestorsA country with a developing economy cannot depend exclusively on its own domestic savings to propel its economy's rapid growth. The domestic savings of India presently are 25% of its GDP. But this can provide only a 2 to 3% growth of its economy on annual basis. The country has to maintain an 8 to 10% growth for a period of two decades to reach the level of advanced nations and to wipe out widespread poverty of its people. The gap is to be covered by inflow of foreign investment along with advanced technology.

3.4.4 Taxation and Repatriation:The taxation norms applicable to a FII are shown in the table below.

Nature of Income Long-term capital gains Short-term capital gains Dividend Income Interest Income

Tax Rate 10% 30% Nil 20%

Long term capital gain: Capital gain on sale of securities held for a period of more than one year. Short term capital gain: Capital gain on sale of securities held for a period of less than one year.

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Liberal Tax Concessions are offered to the FIIs to attract them to invest in Indian Securities Market. The taxation of income of Foreign Institutional Investors from securities or capital gains arising from their transfer for the present, shall be as under: y

The income received in respect of securities (other than units of offshore funds covered by section 115 AB of the Income-Tax Act) is to be taxed at the rate of 20%.

y

Income by way of long-term capital gains arising from the transfer of the said securities is to be taxed at the rate of 10%.

y

Income by way of short-term capital gains arising from the transfer of the said securities is to be taxed at the rate of 30%.

The expression "securities" include Shares, Scrips, stocks, bonds, debentures, debenture stocks or other marketable securities of a like nature in or of any incorporated or other body corporate; Government securities; and Rights or interests in securities

On this new path of liberalisation of the Indian economy, portfolio investments by Foreign Institutional Investors (FIIs) in primary or secondary markets are allowed subject to a ceiling of 24 per cent of issued share capital for the total holdings of all registered FIIs in any one company. The ceiling would apply to all holdings taking into account the conversions out of the fully or partly convertible debentures issued by the company. Also the holding of a single FII in any company would also be subject to a ceiling of 5 per cent of total issued capital. For this purpose, the holding of an FII group will be counted as single FII. Further the maximum holding of 24 per cent for all nonresident FIIs will also include NRI and OCB investments but will not include Offshore Single Regional Funds, Global Depository Receipts and Euro Convertible Bonds. The most important feature of the guidelines issued by the Finance Ministry, Government of India is that there will be no restriction on the volume of investments of FIIs and no lock-in period prescribed for the purposes of such investments made by FIIs.

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3.5 CATEGORIES OF FIIS WHO ARE AUTHORISED TO INVEST IN PORTFOLIO OF SECURITIES IN INDIA Category -1: The applicant should belong to any of the following categories:y y

Pension Funds Mutual Funds: A security that gives small investors access to a well diversified portfolio of equities, bonds, and other securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed. The fund's net asset value (NAV) is determined each day. Each mutual fund portfolio is invested to match the objective stated in the prospectus.

y

Investment Trust: Investment trusts are companies that invest in the shares of other companies. They pool investors' money and generally delegate to a professional fund manager to invest in the shares of a wider range of companies than most people could practically invest in themselves. The investment trust often has no employees, only a board of directors comprising only non-executive directors. Investment trusts are traded on stock exchanges like other public companies. The share price does not always reflect the underlying value of the share portfolio held by the investment trust. In such cases, the investment trust is referred to as trading at a discount (or premium) to NAV (net asset value). The investment trust sector, in particular split capital investment trusts have suffered somewhat over the last few years.

y

Insurance or reinsurance companies: Insurance companies may be classified as: Life insurance companies, who sell life insurance, annuities and pensions products. Non-life or general insurance companies, who sell other types of insurance. Insurance companies are also often classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders, (who may or may not own policies) own stock insurance companies.

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Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves.

y

Endowment Funds: the capital that provides income for an institution

y

University Funds

y

Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf.

Category -2: FIIs who propose to invest their proprietary funds or on behalf of "broad based" funds or on of foreign corporates and individuals.

y

Asset Management Companies: A highly regulated organization that pools money from many people into portfolio structured to achieve certain objectives.

y

Nominee Companies

y

Institutional Portfolio Managers

y

Trustees

y

Power of Attorney Holders

y

Bank

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3.6 MAURITIUS ROUTE TAKEN BY FIIS Double Taxation Avoidance Agreements (DTAA)The Double Tax Avoidance Agreements (DTAA) are essentially bilateral agreements entered into between two countries, in our case, between India and another foreign state. The basic objective is to promote and foster economic trade and investment between two countries by avoiding double taxation.

The advantages of DTAA are as under,y y y y

Lower Withholding Taxes Complete Exemption of Income from Taxes Underlying Tax Credits Tax Sparing Credits

India has entered into a DTAA agreement with Mauritius. Mauritius Double Taxation Avoidance Treaty is being used by the FIIs, Indian corporate houses and other speculators to avoid paying taxes in the country. FIIs are using this route fraudulently to avoid paying legitimate taxes in India. Not only did the finance ministry protect the tax-dodging FIIs, it also "clarified" further that this would apply to all investments routed through Mauritius. It is now clear that Mauritius is emerging as a vital hub in the speculative activities in the Indian stock market and the finance minister is an active accomplice.

International giants such as Merrill Lynch, GE Capital and Enron routed their investments through Mauritius, whose fiscal laws are so framed as to make it an attractive pass through. It is no doubt true that nameplate companies are masquerading as FIIs established in Mauritius. It is also true that tax treaties with countries promising tax exemptions have been found to be a convenient fig leaf for governments of emerging markets.

The Finance Ministrys decision to treat any Foreign Institutional Investor (FII) who has a Branch office in as a Mauritius Company under the Double Taxation Avoidance Treaty with Mauritius will lead to considerable tax loss to the national exchequer. 23

Under the Income Tax Act, a foreign Company is liable to pay tax in India if the income accrues in India. Obviously, any profit from buying and selling shares in the Indian Stock market is income in India; an FII operating in India is therefore to be taxed in India under the Income Tax Act. If it is a short term gain (profits made due to such sales within the year), the short term capital gains tax of 30% apply and if the stocks have been held for more than a year, a 10% capital gains tax apply on such proceeds. Thus, this is the range of taxation that should apply on the FIIs profits from stock market. The Double Taxation treaties that India has with most countries are meant for not taxing the same income at both ends. Thus if a US company operates in India, under the double taxation treaty with US, the Indian income will not be taxed in US again as this has already been taxed in India. Under the special provisions of the Double Tax Avoidance Agreement with Mauritius, individuals and companies that are residents of Mauritius can pay their tax there, instead of in India. However, to qualify as a resident of Mauritius under the clauses of the Treaty, the companys management will have to be located in Mauritius; Mauritius, it may not be noted has no capital gains tax. If the double taxation treaty with US is considered, an American FII will have to pay capital gains tax in India and dividend tax in the US. However, this does not help these FIIs; therefore adoption of the Mauritius route. The FIIs have tried to use the Mauritius route to avoid paying capital gains tax. Out of the 521 FIIs registered with SEBI, only one is shown as registered in Mauritius. What these FIIs have done is that they have registered a branch office as an Overseas Company in Mauritius. The loss of tax revenue, under a situation where the government claims it is short of resources, is one of the issues. The other major issue is the impact of hot money flows in and out of the Indian stock exchange. In order to reduce short term flows and encourage long term investments, the short term capital gains tax is 30% as against long term capital gains tax of 10%. However as Mauritius has no capital gains tax, this means that the FIIs can take money in and out of the Indian bourses at will.

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3.7 FOREIGN DIRECT INVESTMENTS AND PORTFOLIO INVESTMENTForeign Direct Investment A company from one country obtains controlling interest in a (new or existing)

firm in another country, and then operates that firm as a part of the multinational business of the investing firm FDI may be financed through parent company transfer of funds to the new

affiliate, borrowing from home-country lenders, borrowing in the host country by the parent company, or any combination of these strategies. Exists in principle when the foreign firm has de facto control over the host-

country firm. (Control of assets) Does not require international transfer of fund but of ownership which may

finance the transaction in diverse ways

Portfolio Investment a firm buys stocks, bonds, and/or other financial instruments that do not involve

management of the assets Requires international transfer of funds

There are differences, between FDI and the other flows. FDI is problematic for foreign investors because it means bringing into a country managerial capacity and organisation. In contrast, FII is easy. Only money needs to be invested for earning returns. No effort is required to build organisational capacity for operating in that market. But if a country does not have a well-developed stock market, foreign investment has limited choices.

Today, it is relatively effortless for a foreign institutional investor (FII) to enter the capital market. A Sebi registration, proceeded by a fairly perfunctory due diligence, is all it takes before an FII can enter the Indian stock market and commence trading. Exi is equally t simple.

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For FDI, however, both entry and exit are far more difficult. Even in sectors opened to FDI on paper, problems remain at the grassroots. There are innumerable clearances that need to be obtained at the state and district levels. There are also a number of practical hurdles, such as infrastructure bottlenecks, all of which make entry difficult. Exit is more complicated.

3.8 RECENT TRENDS IN FOREIGN INVESTMENTFII inflows to India during the last six-month period of Nov 2004 to April 2005 have exceeded US $8 billion. FDI flows have been less than one third of this amount. Very often arguments are made that this is not good. Instead of having so much portfolio investment, India should have been attracting more FDI. However, contrary to this common belief, research suggests that attracting FII may be a sign of good health and attracting FDI, a sign of bad health of the economy. In contrast to the commonly held unfavorable view of FII flows, evidence suggests that countries with good institutions and markets attract more FII, while countries with poor laws and institutions attract more FDI.

FDI is problematic for foreign investors because it means bringing into a country managerial capacity and organisation. In contrast, FII is easy. Only money needs to be invested for earning returns. No effort is required to build organisational capacity for operating in that market. But if a country does not have a well-developed stock market, foreign investment has limited choices. In the well-developed markets of Europe, for instance, the share of FII in total capital flows is high. In contrast, in the countries of Africa, FDI is the dominant form of foreign investment flows. However, too many investors do not want to venture into poor countries so the total foreign private inflows are small.

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3.9 MUTUAL FUNDSA Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme's stated objective. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

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3.9.1 Types of mutual fundsBy Structure Open-ended schemes are open for subscription the whole year. They do not have a fixed maturity. You can buy and sell your units at the NAV related prices to the Mutual funds.

Close-ended schemes can be subscribed to, only during the initial public offer and thereafter you can buy and sell the units of the scheme on the stock exchange where they are listed. They have a stipulated Maturity period the duration of which is generally 2 to 15 years. They are usually traded at a discount to the NAV. By investments objective Growth/Equity Funds Equity funds (often described as growth funds) aim to provide capital growth by investing in the shares of individual companies. Depending on the funds objective, this could range from large blue-chip organizations to small and new businesses. Any dividends received by the fund can be reinvested by the fund manager to provide further growth or paid to investors. Both risk and returns are high but they could be a good investment if you have a long-term perspective and can stay invested for at least five years.

Debt/Income Funds The aim of debt or income funds is to make regular payments to its investors, although dividends can be reinvested to buy more units of the fund. To provide with a steady income, these funds generally invest in fixed income securities such as bonds, corporate debentures, government securities (gilts) and money market instruments. Hence they are relatively safer than equity funds. At the same time the expected returns from debt funds would be lower. Balanced Funds As the name suggests, these funds aim for balance, so they are made up of a mixture of equities and debt instruments. They match the goals of investors who seek to grow their

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capital and get regular income, while retaining relatively low risk. The debt or bond element of the fund provides a level of income and acts as the safety net during dynamic periods in the market, while equities provide the potential for capital appreciation.

Money market or liquid funds are an appealing alternative to bank deposits because they aim to provide stability, liquidity, capital preservation and slightly higher interest rates than bank accounts. When you invest in a money market fund, the fund manager invests in cash assets such as treasury bills, certificates of deposit and commercial paper. Returns on these funds fluctuate much less compared to other funds, but they are not guaranteed. They are appropriate for corporate and individual investors who wish to park their surplus money in a fund for a short period.

Gilt Funds Gilt Funds are debt funds, which invest only in Government Securities and hence have zero credit risk. However it does involve Interest Rate Risk.

Marginal Equity Funds These are funds, which have predominant investment of atleast 75% in debt instruments & the balance in equities. These funds will get you the security of Debt with the flavour of equities.

Sectoral funds These are specialty mutual funds that invest in stocks that fall into a certain sector of the economy. Here the portfolio is dispersed or spread across the stocks in a particular sector.This type of scheme is ideal for the investor who has already made up his mind to confine his risk and return to one particular sector. Thus, a FMCG fund would invest in companies that manufacture fast moving consumer goods.

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Table No 4 Table showing Net Mutual Fund inflow into Stock ExchangeYear* (Upto Feb )2005 2004 2003 2002 2001 2000

76,125 1,75,988 2,85,502 1,43,818 1,22,196 1,78,788

69,619 1,93,953 2,81,478 1,73,304 1,72,459 1,86,138

6,505 -17,966 4,025 -30,181 -50,259 -7347

Graph No 4Ne MF10 000

e men (R mn)

0 001 200 003 2004 ( Feb ) 005 -10 000 - 0 000 -30 000 -40 000 -50 000 -60 000

Year

The mutual fund is an important institution in Stock market operation. Even though MFs are active trader in stock exchange, they are not influencing much on the share prices. In most of the year the MFs indulged in negative net investment despite of heavy purchases. Most of the mutual funds are concentrating on the debt and government securities market in order to meet the various objectives of the investors.

" !

Purchases Rs mn

Sales Rs mn

Net Investment Rs mn

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3.10 NATIONAL STOCK EXCHANGEThe Organisation The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.

S&P CNX Nifty The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services. S&P owns the most important index in the world, the S&P 500 index, which is the foundation of the largest index funds and most liquid index futures markets in the world. When S&P came to India to look at market indices, they focused upon the S&P CNX Nifty as opposed to alternative indices. They now stand behind the S&P CNX Nifty, as is evidenced by the name "S&P CNX Nifty" CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. Working Of S&P CNX Nifty S&P CNX Nifty is based upon solid economic research. A trillion calculations were expended to evolve the rules inside the S&P CNX Nifty index. The results of this work are remarkably simple: 31

(a) The size of the stock is 50. (b) Stocks considered for the S&P CNX Nifty must be liquid by the `impact cost' criterion (c) The largest 50 stocks that meet the criterion go into the index.

Features of NSE Nifty Diversification: S&P CNX Nifty is a more diversified index, accurately reflecting overall market conditions. The reward-to-risk ratio of S&P CNX Nifty is higher than other leading indices, making it a more attractive portfolio hence offering similar returns, but at lesser risk.

Liquidity: Over one year (October 1998 to October 1999), the trading volume on NSE for Nifty stocks was Rs.3.5 trillion, giving a liquidity ratio of 105%. The `liquidity ratio' is defined as trading volume over one year divided by market capitalization today.

Hedging effectiveness: The basic risk of Nifty futures will be lower owing to the superior liquidity of Nifty stocks and of NSE. Nifty has higher correlations with typical portfolios in India as compared to any other index. These two factors imply that hedging using Nifty futures will be superior.

Governance: Nifty is managed by a professional team at IISL, a company setup by NSE and CRISIL with technical assistance from Standard & Poor's. There is a three-tier governance structure comprising the board of directors of IISL, the Index Policy Committee, and the Index Maintenance Subcommittee. S&P CNX Nifty has fully articulated and professionally implemented rules governing index revision, corporate actions, etc. These rules are carefully thought out, under Indian conditions, to dovetail with operational problems of index funds and index arbitrageurs. S&P CNX Nifty is relatively free of manipulation, for three reasons: (a) the index levels are calculated from a highly liquid exchange with superior surveillance procedures (b) S&P CNX Nifty has a large market capitalisation so the consequence (upon the index) of a given move in an individual stock price is smaller and

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(c) S&P CNX Nifty calculation intrinsically requires liquidity in proportion to market capitalisation, thus avoiding weak links which a manipulator can attack. Users of the S&P CNX Nifty benefit from the research that is possible owing to the long timeseries available: both S&P CNX Nifty and S&P CNX Nifty Total Returns Index series are observed from July 1990 onwards. S&P CNX Nifty is backed by solid economic research and three most respected institutions: NSE, CRISIL and S&P.

Table NO 5 Composition of S&P CNX Nifty Sl no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Company name ABB Ltd. Associated Cement Companies Ltd. Bajaj Auto Ltd. Bharat Heavy Electricals Ltd. Bharat Petroleum Corporation Ltd. Bharti Tele-Ventures Ltd. Cipla Ltd. Colgate-Palmolive (India) Ltd. Dabur India Ltd. Dr. Reddy's Laboratories Ltd. Gail (india) Ltd. Glaxosmithkline Pharmaceuticals Ltd. Grasim Industries Ltd. Gujarat Ambuja Cements Ltd. HCL Technologies Ltd. HDFC Bank Ltd. Hero Honda Motors Ltd. Hindalco Industries Ltd. Hindustan Lever Ltd. Hindustan Petroleum Corporation Ld. Housing Development Finance Industry Electrical equipment Cement and cement products Automobiles - 2 and 3 wheelers Electrical equipment Refineries Telecommunication - services Pharmaceuticals Personal care Personal care Pharmaceuticals Gas Pharmaceuticals Cement and cement products Cement and cement products Computers - software Banks Automobiles - 2 and 3 wheelers Aluminium Diversified Refineries Finance - housing

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Corporation Ltd. 22 23 24 ITC Ltd. ICICI Bank Ltd. Indian Petrochemicals Corporation Ltd. 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Infosys Technologies Ltd. Larsen & Toubro Ltd. Mahanagar Telephone Nigam Ltd. Mahindra & Mahindra Ltd. Maruti Udyog Ltd. National Aluminium Co. Ltd. Oil & Natural Gas Corporation Ltd. Oriental Bank Of Commerce Punjab National Bank Ranbaxy Laboratories Ltd. Reliance Energy Ltd. Reliance Industries Ltd. Satyam Computer Services Ltd. Shipping Corporation Of India Ltd. State Bank Of India Steel Authority Of India Ltd. Sun Pharmaceutical Industries Ltd. Tata Chemicals Ltd. Tata Consultancy Services Ltd. Tata Iron & Steel Co. Ltd. Tata Motors Ltd. Tata Power Co. Ltd. Tata Tea Ltd. Videsh Sanchar Nigam Ltd. Wipro Ltd. Zee Telefilms Ltd. Cigarettes Banks Petrochemicals Computers software Engineering Telecommunication - services Automobiles - 4 wheelers Automobiles - 4 wheelers Aluminium Oil exploration/production Banks Banks Pharmaceuticals Power Refineries Computers software Shipping Banks Steel and steel products Pharmaceuticals Chemicals inorganic Computers software Steel and steel products Automobiles - 4 wheelers Power Tea and coffee Telecommunication - services Computers software Media & entertainment

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3.11 FII and Indian Stock MarketMovements in the Nifty during the last 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 Rs 944 mn and Rs 1850 million respectively in 2003 and 2004. These figures compare with a peak level of net purchases of Rs 156 million 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. The cumulative stock of FII investment, totaling $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. Not surprisingly, there has been a substantial increase in the share of foreign stockholding in leading Indian companies. According to one estimate, by end-2003, foreigners had cornered close to 30 per cent of the equity in India's top 50 companies - the Nifty 50. In contrast, foreigners collectively owned just 18 per cent in these companies at the end of 2001 and 22 per cent in December 2002.

A recent analysis estimated that at the end of June 2004, FIIs controlled on average 21.6 per cent of shares in 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.

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Given this presence of FIIs, their role in determining share price m ovements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, though there are more than 4,700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.

These features of Indian stock markets induce a high degree of volatility for four reasons. In as much as an increase in investment by FIIs triggers a sharp price increase, it would in the first instance encourage further investments so that there is a tendency for any correction of price increases unwarranted by price earnings ratios to be delayed. And when the correction begins, it would have to be led by an FII pullout and can take the form of an extremely sharp decline in prices.

Secondly, as and when FIIs are attracted to the market by expectations of a price increase that tend to be automatically realised, the inflow of foreign capital can result in an appreciation of the rupee vis--vis the dollar (say). This increases the return earned in foreign exchange, when rupee assets are sold and the revenue converted into dollars. As a result, the investments turn even more attractive, triggering an investment spiral that would imply a sharper fall when any correction begins.

Thirdly, the growing realisation by the FIIs of the power they wield in what are shallow markets, encourages speculative investment aimed at pushing the market up and choosing an appropriate moment to exit. This implicit manipulation of the market, if resorted to often enough, would obviously imply a substantial increase in volatility.

Finally, in volatile markets, domestic speculators too attempt to manipulate markets in periods of unusually high prices. Thus, most recently, the Securities and Exchange Board of India (SEBI) is supposed to have issued show-cause notices to four as-yet-unnamed

36

entities, relating to their activities on around Black Monday, May 17, 2004, when the Sensex recorded a steep decline to a low of 4505.

The last two years have been remarkable because, though these features of the stock market imply volatility; there have been more months when the market has been on the rise rather than on the decline. This clearly means that FIIs have been bullish on India for much of that time. The problem is that such bullishness is often driven by events outside the country, whether it is the performance of other equity markets or developments in non-equity markets elsewhere in the world. It is to be expected that FIIs would seek out the best returns as well as hedge their investments by maintaining a diversified geographical and market portfolio. The difficulty is that when they make their portfolio adjustments, which may imply small shifts in favour of or against a country like India, the effects it has on host markets are substantial. Those effects can then trigger a speculative spiral for the reasons discussed above, resulting in destabilising tendencies. Thus the end of the bull run in January was seen to be the result of a slowing of FII investments, partly triggered by expectations of an interest rate rise in the U.S. These aspects of the market are of significance because financial liberalisation has meant that developments in equity markets can have major repercussions elsewhere in the system. With banks allowed to play a greater role in equity markets, any slump in those markets can affect the functioning of parts of the banking system.

Similarly, if any set of developments encourages an unusually high outflow of FII capital from the market, it can impact adversely on the value of the rupee and set of speculation in the currency that can, in special circumstances, result in a currency crisis. There are now too many instances of such effects worldwide for it to be dismissed on the ground that India's reserves are adequate to manage the situation.

Thus, the volatility being displayed by India's equity markets warrant returning to a set of questions that have been bypassed in the course of neo-liberal reform in India. The most important of those questions is whether India needs FII investment at all. With the current account of the balance of payments recording a surplus in recent years, thanks to large 37

inflows on account of non-resident remittances and earnings from exports of software and Information Technology-enabled services, we do not need those FII flows to finance foreign exchange expenditures. Neither does such capital help finance new investment, focused as it is on secondary market trading of pre-existing equity. And finally, we do not need to shore up the Sensex, since such indices are inevitably volatile and merely help create and destroy paper wealth and generate, in the process, inexplicable bouts of euphoria and anguish in the financial press.

In the circumstances, the best option for the policy maker is to find ways of reducing substantially net flows of FII investments into India's markets. This would help focus attention on the creation of real wealth as well as remove barriers to the creation of such wealth, such as the constant pressure to provide tax concessions that erode the tax base and the persisting obsession with curtailing fiscal deficits, both of which are driven by dependence on finance capital.

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3.12 MUTUAL FUNDS AND INDIAN STOCK MARKETThe transactions by domestic mutual funds (MFs) in the equity market is an indicator of domestic investor participation in the stock market, domestic investors have been active participants in recent times.

In 2003, as in the previous years, the numbers on net MF investments (gross purchases minus sales) in the equity market suggest that MF investments were down to a trickle, compared to FII flows. Till date in 2003, FIIs have made net equity investments of Rs 23,000 crore, while MFs have actually pulled out around Rs 1,100 crore on a net basis.

MFs account for significant volumes: But this wide gulf between the two numbers is largely because while FII investments have been more of a one-way flow with a steady increase in the level of purchases from month to month. While MFs have indulged in heightened levels of both purchase and sales activity, with one cancelling out the other. This has led to a low level of net investments by MFs. If one compares the total purchases and sales activity of MFs to the purchases and sales by FIIs, it is clear that MFs (and thus domestic investors) do account for a significant portion of the transaction volumes on the bourses.

Purchases gather steam: Take the monthly trends in purchases by MFs, for instance. In 2001, gross purchases by MFs accounted for no more than 23 per cent of the value of purchases made by the FIIs. In 2002, this proportion climbed to 33 per cent. In 2003, though FIIs have sharply scaled up their levels of investments, MFs too appear to have scaled up their purchases. MF purchases remained at over 30 per cent of the FII purchases, in value terms, in the first nine months of 2003.

This appears to indicate that domestic investors too have been fairly active participants in the equity markets. And investments routed through MFs obviously represent only a part of domestic investor interest in the equity market.

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If MFs have accounted for significant volumes of purchases on the bourses, they have had an even higher share of the sales volumes.

The domestic investors have been offloading part of their equity holdings to the FIIs. In fact, this could be one reason why a pullout by the FIIs tends to pull the plug on a bull market. The MFs and domestic investors appear to adopt the sell mode when the market is on a high. So any pullout by FIIs only adds to the selling pressure, which already exists due to MF selling activity.

A healthy trend: But this trend (of heightened MF selling) is not necessarily an unhealthy trend for the Indian equity market. For one, it shows that domestic investors have been making use of the sharp rise in the equity values in the recent times to book profits on their earlier investments. Given that a major portion of investments in equity MFs have been made at Sensex levels of over 4000, this is a welcome trend, as it suggests that such investors are likely to have made a profit on their holdings. Second, the recent pullouts by MFs also reinforce the view that the MFs themselves are taking a more cautious stance in this bull market than they did in 2000. Portfolio statements of leading MFs show that they appear to be adhering to a discipline of periodically taking profits on stocks based on target price benchmarks for each of their holdings.

What is more, MFs have declared liberal dividend payouts on their equity schemes in the recent bull run, ensuring that their investors are able to periodically cash in on gains when the market is on the upswing.

Both these trends could help diminish the negative experience that domestic investors have, time and again, faced with equity investing.

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4. ANALYSIS OF DATA4.1 Correlation and Regression AnalysisCorrelations FII Inflo Nifty MF Flo

FII Inflo

Pearson Correlation N

1.000 .346(**) 759 .346(**) 759 -.132(**) 759 759 1.000 759 .039 759

-.132(**) 759 .039 759 1.000 759

Nifty

Pearson Correlation N

MF Flo

Pearson Correlation N

** Correlation is significant at the 0.01 level

Inference:y

The correlation between Nifty and FII is significant. This means that the FII inflows influence to a considerable extent on the Nifty volatility.

y

The correlation between Nifty and MF flow is only .039. This means that Nifty is not influenced by the mutual fund flows.

y

The FII inflow and MF flows are negatively correlated. But the correlation is significant. The correlation is only -0.132

y y

The correlation is calculated at 99% confidence level. The number of observations considered for this correlation analysis is 759. The observations being the daily closing price of Nifty, daily FII cash inflow and daily MF flow.

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Model Summary(c) Model 1 2 R .346(a) .356(b) R Square .120 .127 Adjusted R Square .118 .125 Std. Error of the Estimate 325.0856 323.9434 .192 DurbinWatson

A Predictors: (Constant), FII Inflow B Predictors: (Constant), FII Inflow, MF Flow C Dependent Variable: Nifty

Inference:y

The Durbin Watson Statistic gives that there is no significant positive autocorrelation between the two independent variables that are FIIs and Mutual Funds Cash Flows. It means that there is impact on each other among the independent variables also.

y

The R Square value of the FII inflow is 0.118. This means that FII explains only 11.8% of variance of the Nifty. Similarly the R square value of the MF flow is 0.125 this means MF flows explains 12.5% of the variance of the Nifty.

y

Standard error is the variation in the variable that is not explained by the regression equation. Deviation of variable scores from the predicted scores. This is also called Error variation. Standard error for FII is 325.09 whereas standard error for MF is 323.94.

42

CoefficientsUn standardized Coefficients Standardized Coefficients

Model 1 (Constant) FII Inflow 2 (Constant) FII Inflow MF Flow

B 1299.800 .513 1300.823 .530 .521

Std. Error 12.784 .051 12.746 .051 .207

Beta

.346

.357 .086

Inference:Impact of FII flow is almost 4 times than that of Mf flow Beta of FII inflow=0.357 Beta of MF inflow=0.086 Therefore 0.357 = 4.15 0.086 The influence of FII is very high as compared to the influence of the mutual fund flows on the Index. The main reason being the active participation by the FIIs.

43

4.2 Asset allocation Analysis of selected Mutual Funds Schemes

Name of MF Scheme

Asset allocation Equity (%) Money Market %)

% of NonIndex stocks in Equity

CAN EMERGING EQUITIES GROWTH CHOLA MULTI CAP FUND GROWTH DSP MERRILL LYNCH EQUITY FUND FRANKLIN INDIA GROWTH FUND HDFC EQUITY FUND DIVIDEND ING VYSYA EQUITY FUND GROWTH PRUDENTIAL ICICI EMERGING STAR FUND GROWTH RELIANCE VISION - GROWTH SBI MAGNUM EQUITY FUND TATA EQUITY P/E FUND GROWTH UTI MASTER VALUE FUND UTI GROWTH & VALUE FUND ANNUAL DIVIDEND TAURUS STARSHARE LIC EQUITY FUND - GROWTH HSBC EQUITY FUND GROWTH BIRLA EQUITY PLAN

81.53 87.61 89.75 97.92 99.18 95.49 92.36 98.18 95.77 94.3 95.77 90.73 95.57 89.67 98.76 92.2

18.47 12.31 10.25 2.08 0.82 4.51 7.64 1.82 4.23 5.7 4.23 ----1.24 10.33 -----7.8

81% 40% 48% 36% 44% 47% 94% 73% 35% 67% 88% 60% 88% 27% 46%

Only a sample of 15 Equity Schemes have been taken for the purpose of the study

44

Inference:y

Most of the mutual fund companies are investing in non-index stocks. In some of the schemes the investment in non-index stocks is as high as 88%.

y

Some mutual fund companies mid cap funds where the investment in non-index companies is more than 95% of the total fund size.

y

In case of Balanced fund where investment is made in both debt and equity, the proportion of the equity investment in non-index fund is considerable.

y

The inference, which can be drawn from, this analysis is that most of the mutual funds are playing in the mid cap and non-index stocks and FII in index funds.

y

As the mutual fund is the pool of savings of small investors, they have to give them proper return. Therefore they are investing in those stocks where the volatility of returns is less. The volatility of the non-index funds are usually less as compared to the index stocks.

Correlations Bet een CNX mid ca and MF flo CNX Midca CNX Midca MF Flo Pearson Correlation N Pearson Correlation N MF Flo

1.000 756 .023 756

.023 756 1.000 756

Inference:y

The correlation between is MF flow and CNX Midcap index is not that significant. The correlation is very low at 0.023.

y

This means that the even though MF fund companies are investing significant portion of their equity investment in non-index stocks, they are not influencing the prices of the stocks and even the market.

45

1000

1500

2000

2500

3000

1/1/2002 3/1/2002 5/1/2002 7/1/2002 9/1/2002 11/1/2002 1/1/2003

3/1/2003 5/1/2003 Date 7/1/2003 9/1/2003 11/1/2003 1/1/2004 3/1/2004 5/1/2004 7/1/2004

-500

500

0

MF flo s and CNX midca Index

Graph No 5

46

9/1/2004 11/1/2004

midcap

mf flows

-1000.00 1000.00 1500.00 2000.00 2500.00 3000.00 3500.00 4000.00 11/03/2002 23/05/2002 01/08/2002 16/10/2002 30/12/2002 11/03/2003 26/05/2003 04/08/2003 15/10/2003 23/12/2003 08/03/2004 19/05/2004 28/07/2004 -500.00 500.00 0.00 Date

Graph No 6

Graph showing FII Inflow and Nifty Index

47

06/10/2004 20/12/2004

FII Daily cash flow ifty

1000.00

1500.00

2000.00

2500.00

04/03/2002 09/05/2002 11/07/2002 16/09/2002 22/11/2002 27/01/2003 02/04/2003 09/06/2003 ate 11/08/2003 15/10/2003 16/12/2003 20/02/2004 28/04/2004

-500.00 ae #$

500.00

0.00

Gra h ho Graph No 7 ng F Flows and ifty

48

30/06/2004 01/09/2004 04/11/2004

m o s

N

04/03/2002 09/05/2002 11/07/2002 16/09/2002 22/11/2002 27/01/2003 02/04/2003 09/06/2003 11/08/2003 15/10/2003 16/12/2003 20/02/2004 28/04/2004 30/06/2004 49 01/09/2004 04/11/2004 Date

-1000.00

1000.00

1500.00

2000.00

2500.00

3000.00

3500.00

4000.00

Date

-500.00

500.00

0.00

Graph showing FII Flow and MF Flow

Graph No 8

mf flow s

FII Daily cash flow

5. SUMMARY OF FINDINGSy The correlation between the independent and dependent variables, Foreign Institutional Investors (FII) and Index (Nifty), on the daily basis is significant. It means that daily Movement in the Index can be explained by the movement of FII Inflows.

y

It can be observed from correlation analysis that 34.6% of the Nifty Index prices are influenced by the operation of the FII in the stock market.

y

There is no significant correlation between the Mutual Fund Flow and the Nifty Index. It means that the index cannot be explained by the movement of MF inflows. The influence of mutual fund is only 3.9%.

y

The daily price of nifty is positively correlated with the inflows of FII in into the nifty. Therefore if the net investment is positive, then the nifty is also reacting positively and vice versa in case of negative inflow.

y

The Regression Analysis gives that the FII flow has a greater impact on the volatility of the nifty index as compared to the MF flows. The impact of FII inflow on Nifty is four times more than that of the Mf flows.

y

The institutional investors influence the share prices to a considerable amount. The combined effect of FII inflow and MF inflow on Nifty is 38.5%. The other institutional investors like financial institutions; banks and Insurance companies do not influence much on the share prices.

y

The individual investor has a very important role to play in the stock market, as their influence on the nifty is 61.5%. The individual investor includes retail investors, speculators, daily traders etc.

50

y

As the FII influence only one third of the market movement, the speculators and day traders cannot base their decision only on FII activities.

y

The FII are very active in the Index stocks and Blue chip stocks. They are not investing much in mid cap sector.

y

It is found from the analysis of selected Equity schemes of the various mutual funds operating in Indian market; the mutual funds are playing in the non-index sector. The mutual funds invest a considerable amount in the non-index companies. From the analysis it is found that the Mutual Fund Schemes invested around 59% of total equity investment, in non-index stocks.

y

The Coefficient of Determination is 0.12, which implies that only 12% of the variation in the volatility in NIFTY can be explained by the independent variable, viz, daily volatility in FII inflows. And it is 12.7% in case of MF flows. So we can conclude that there are some other factors influencing the volatility of NIFTY, which have to be investigated.

y

The Durbin Watson Statistic gives that there is not that significant positive autocorrelation between the two independent variables that are FIIs and Mutual Funds Cash Flows. It means that there is not much impact on each other among the independent variables also.

y

Even though the mutual funds are investing a considerable proportion of their equity fund in non-index stocks, they are not influencing much on the prices of stock. And also the market.

51

RECOMMENDATIONSy The individual investor has a very important role to play in the market. The individual investor should not base their decision to buy or sell only on the basis of the FII investments flowing into the market. y Considering the volatility in the stock market, the development of a vibrant local hedge fund industry is essential. y The domestic individual investor should actively participate in the stock market so that the stock market is not controlled only by the FIIs. y The individual or retail investor should understand that he has an important role to play in the market. Proper investor guidance should be provided. y The mutual fund companies have to participate actively in the stock market, both in index and non-index stocks so that stability in the stock market can be established.

52

6. CONCLUSIONThis study analyses the impact primarily of FII Inflows on the volatility of the Index (Nifty). On the basis of the results from the analysis given above it can be said that the impact of FII cash inflows on the index volatility is significant enough to influence. The correlation between the FII inflow and Nifty is positively. Therefore The Hypothesis of significant impact of FII on Nifty is accepted. The Hypothesis of significant impact of Mutual Fund on Nifty is rejected.

Further if we consider the volatility impact of both FIIs and MFs, only 24.7% of the volatility in index can be explained by the two variables combined. It means that these two institutional investors are major contributors of market volatility.

It can be concluded from the analysis that then FII operate only in the index and Blue Chip stocks and Mutual Fund operate in the Non index and non blue chip stocks. Mutual especially concentrate on high return Mid cap Companies to invest.

The return on the Indian stock market is considerably high and it is attracting more and more FII. FIIs are interested in Indian stock exchanges especially Nifty as it constitutes the best 50 companies of India. So the FII are playing a dominant role in the volatility of the Nifty. The investment of FII is more in Nifty as compared to other stock exchanges of India.

The Purchase and Sale of securities by FII has a bearing on the Nifty prices. This is very much evident from the crash of index prices when the FII are very active in selling of securities when they see some economic instability.

The domestic institutional investors have to play an active role in the stock market so as to bring the stability in the stock market. The stability of the stock market is important indicator of the economic development. 53

7. BIBLIOGRAPHYy y y y y y y http://www.myiris.com/shares/market/marketPulse/mfMonShow.php?datval=Dec2004 http://www.indiainfoline.com/stok/fiin/arch.html http://www.cmlinks.com/walchand/fii.asp http://www.financialcertified.com/Hedge%20Funds%20India%20Thomas%20AAFM %20Journal%20Submission.htm www.indiainfoline.com www.mutualfundsndia.com Internation Business by Eun & Rusnik

54

7. ANNEXURETable Showing Daily FII, MF Flow and Nifty Index for the time period 1/1//2002 to 31/12/2005 Date 01/01/2002 02/01/2002 03/01/2002 04/01/2002 07/01/2002 08/01/2002 09/01/2002 10/01/2002 11/01/2002 14/01/2002 15/01/2002 16/01/2002 17/01/2002 18/01/2002 21/01/2002 22/01/2002 23/01/2002 24/01/2002 25/01/2002 28/01/2002 29/01/2002 30/01/2002 31/01/2002 01/02/2002 04/02/2002 05/02/2002 06/02/2002 07/02/2002 08/02/2002 11/02/2002 12/02/2002 13/02/2002 14/02/2002 15/02/2002 18/02/2002 19/02/2002 20/02/2002 21/02/2002 22/02/2002 25/02/2002 26/02/2002 FII 24.10 13.7 8.7 56.8 310.3 250.5 165.9 -21.8 -0.4 -34 48.9 -62.1 -47.8 39.9 -40.1 -3.3 -38.9 -53.1 27.1 -76 -107 -15.5 -22.6 -42.1 -47.9 -11.1 -6.6 57.1 106.6 250.5 40.6 69.4 233 266.4 162.7 142.9 39.2 100 62.1 130 92.9 Nifty 1055.30 1060.75 1072.25 1096.20 1100.15 1109.90 1102.80 1098.20 1088.55 1109.80 1094.15 1090.30 1109.20 1093.15 1091.35 1092.85 1089.40 1085.30 1080.10 1071.35 1071.65 1067.45 1075.40 1081.65 1076.90 1074.25 1113.10 1110.45 1123.75 1131.55 1129.50 1135.10 1150.00 1159.95 1172.85 1158.90 1145.95 1149.85 1163.50 1165.45 1189.40 mf flo s 1.41 -32.08 -50.63 -77.7 -96.15 -109.86 -41.96 -87.89 17.65 -48.64 13.63 1 50.58 0.59 -16.43 51.01 21.86 4.83 -8.52 -7.41 -6.05 -3.75 -10.22 38.94 1.07 37.65 -15.59 -26.62 -26.76 -24.53 -11.09 -29.56 -48.92 -21.02 -59.48 -26.07 -50.28 -73.8 -50.53 43.97 -14.8 Date 07/07/2003 08/07/2003 09/07/2003 10/07/2003 11/07/2003 14/07/2003 15/07/2003 16/07/2003 17/07/2003 18/07/2003 21/07/2003 22/07/2003 23/07/2003 24/07/2003 25/07/2003 28/07/2003 29/07/2003 30/07/2003 31/07/2003 01/08/2003 04/08/2003 05/08/2003 06/08/2003 07/08/2003 08/08/2003 11/08/2003 12/08/2003 13/08/2003 14/08/2003 18/08/2003 19/08/2003 20/08/2003 21/08/2003 22/08/2003 25/08/2003 26/08/2003 27/08/2003 28/08/2003 29/08/2003 01/09/2003 02/09/2003 FII 297.1 174 190.2 187.4 142.1 -27.6 69.8 90.7 -50.8 25.2 25.2 33.8 -1.1 45.7 246 64.2 148.9 33.6 -10.6 234.9 299.1 84.7 105.5 -73.3 0.8 265.5 159.6 193.1 113 102.1 120.5 155.7 186.4 -393.6 218.6 71.9 -3.9 88.1 162.2 170.9 296.8 Nifty 1140.55 1145.90 1141.05 1162.35 1161.65 1171.50 1159.85 1168.75 1152.00 1140.00 1115.80 1109.20 1119.05 1139.45 1162.75 1169.20 1174.75 1183.00 1185.85 1195.75 1203.60 1184.45 1171.05 1196.95 1222.65 1232.85 1234.75 1246.90 1247.75 1281.40 1277.70 1287.40 1300.95 1311.15 1271.10 1318.20 1340.30 1341.05 1356.55 1375.95 1385.45 mf flo s -3.1 -41.23 -52.22 60 6.24 -11.51 -70.7 73.51 -64.72 -15.54 -45.04 -38.82 61.27 67.28 72.97 5.12 -0.04 82.61 2.51 88.58 10.04 7.54 -62.64 71.73 79.04 33.01 -13.98 -33.19 -2.12 18.19 40.03 -53.26 53.6 69.57 33.15 31.97 57.49 -23.87 -1.5 1.26 -82.7

55

27/02/2002 28/02/2002 01/03/2002 04/03/2002 05/03/2002 06/03/2002 07/03/2002 08/03/2002 11/03/2002 12/03/2002 13/03/2002 14/03/2002 15/03/2002 18/03/2002 19/03/2002 20/03/2002 21/03/2002 22/03/2002 26/03/2002 27/03/2002 28/03/2002 01/04/2002 02/04/2002 03/04/2002 04/04/2002 05/04/2002 08/04/2002 09/04/2002 10/04/2002 11/04/2002 12/04/2002 15/04/2002 16/04/2002 17/04/2002 18/04/2002 19/04/2002 22/04/2002 23/04/2002 24/04/2002 25/04/2002 26/04/2002 29/04/2002 30/04/2002 02/05/2002 03/05/2002 06/05/2002 07/05/2002

141.8 178.8 -2.9 96.1 -3.9 58.9 21.1 161.6 87.6 19.4 -36.1 -11.8 21.3 34.1 26.3 -19.4 23.2 -48.2 5.9 -61.7 19.8 79.1 0.3 51.4 -9.8 61.9 12.6 20.3 -73.9 11.6 44.9 24.2 -81.3 -57.6 48 19.3 -69.7 -1.6 -6.5 -18.5 46.1 -5.3 -83.8 -34.2 42.3 11.4 0.6

1189.20 1142.05 1178.00 1177.35 1178.50 1172.60 1193.05 1187.65 1167.85 1150.45 1157.05 1159.45 1169.75 1169.30 1152.15 1155.60 1144.20 1138.45 1123.05 1123.35 1129.55 1138.95 1136.95 1123.50 1145.90 1141.95 1135.25 1126.70 1138.50 1143.60 1146.50 1134.15 1118.75 1125.10 1129.00 1100.30 1104.15 1106.00 1110.60 1094.30 1097.40 1074.20 1084.50 1093.30 1096.95 1100.95 1110.70

-1.99 5.2 -45.29 -57.94 -16