final presentation fii

8/8/2019 Final Presentation Fii

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ROLE OF FII IN INDIAN CAPITAL MARKET

Presented By:Sanketh

Shetty Harish

Guide: Prof. R K Sharma

Evaluator:Mr.Krishnaprasad


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INTRODUCTION

India opened its stock market to foreign

investors in September 1992.

since 1993,received portfolio investmentfrom foreigners in the form FII

In order to trade in Indian equity market

foreign corporation need to register with SEBI

as FII


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FOREIGN INSTITUTIONAL

INVESTOR

A foreign Institutional Investor (an

"FII") as an institution established or

incorporated outside India whichproposes to make investment in

India in securities of companies

incorporated in India (Indian

Companies)


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INVESTMENT IN INDIAN MARKET

During January to April 2010, FIIs invested US$ 6.6billion in equity and US$ 5.94 billion in debt, of whichUS$ 4.4 billion in equity and US$ 2.1 billion in debt was

invested in March 2010. According to SEBI, FIIs transferred a record US$ 17.5

billion in domestic equities during the calendar year2009. FIIs infused a net US$ 1.1 billion in debtinstruments during the said period.

Data sourced from SEBI shows that the number ofregistered FIIs stood at 1711 and number of registeredsub-accounts rose to 5,382 as ofApril 30, 2010.


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IMPORTANT TERMS IN FII

sub-account

Broad Based Fund

Designated Bank

Domestic Custodian


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REGISTRATION PROCEDURE OF

FOREIGN INSTITUTIONAL INVESTOR

As per Regulation 6 of SEBI (FII) Regulations,

1995

The applicant should be regulated by anappropriate foreign regulatory authority .

The applicant is required to have the

permission under the provisions of the

Foreign Exchange Management Act, 1999

from the Reserve Bank ofIndia.


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Cont

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

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

The applicant has to appoint a local custodian andenter into an agreement with the custodian.

Payment of registration fee of US $ 5,000.00


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REGISTRATION PROCESS FOR FII


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FACTORS CONTRIBUTED SIGNIFICANTLY TO

THE FII FLOWS TO INDIA:

Rapidly developing economy

Regulation and Trading Efficiencies

A

ttractive Markets

Encouraging corporate results


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WHO CAN BE REGISTERED AS AN

FII?

Pension Funds

Mutual Funds

Insurance Companies

Investment Trusts

Banks

University Funds

Foundations

Charitable Trusts / Charitable Societies


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MAJOR FOREIGN INSTITUTIONAL

INVESTORS IN INDIA

Deutsche bank Rs 33597 crore

Goldman Sach- Rs 7,307 crore

HSBC Morgan Stanley

Merrill Lynch

CLSA Swiss finance.


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FINANCIAL INSTRUMENTS ARE

AVAILABLE FOR FII INVESTMENTS

Securities in primary and secondary marketsincluding shares, debentures and warrants ofcompanies, unlisted, listed or to be listed on a

recognized stock exchange in India; Units of mutual funds;

Dated Government Securities;

Derivatives traded on a recognized stockexchange;

Commercial papers.


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FOREIGN INSTITUTIONAL INVEST

CANNOT INVEST IN THE FOLLOWING:-

Business of chit fund

Nidhi Company

Agricultural or plantation activities

Real estate business or construction of farmhouses (real estate business does not includedevelopment of townships, construction ofresidential/commercial premises, roads or

bridges.Trading in Transferable Development Rights(TDRs).


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FOREIGN INSTITUTIONAL

INVESTORS REGISTERED IN INDIAYear FII REGISTERED

1998-1999 450

1999-2000 506

2000-2001 527

2001-2002 490

2002-2003 502

2003-2004 540

2004 -2005 685

2005-2006 8822006-2007 996

2007-2008 1219

2008-2009 1334

2009-2010 1729


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Main sources of Foreign Institutional

Investors:

42%

20%

17%

6%

4%

4%

2%1% 1% 1% 2%

USA

UK

W EUROPE

HONG KONG

SINGAPORE

AUSTRALIA

CANADA

MIDDLE EAST

JAPAN

OTHERS


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Top 10 Stocks where Foreign Institutional

Investors Invested:Name of the Company Best known for FII Share(%)

Sybly Industries limited Manufacturer of polyster yarn &merchendise

74.18

India bull Real Estate Real Estate 67.43

HDFC Private sector Bank 59.85

Geodesic Developing products in Information,communication & entertainment space

53.47

Amtek Auto Automotive components 50.84

IVRCL Infrastructure Infrastructure like waste watertreatment transport builder & power

48.04

Prajay Engineering Real Estate 42.55

Amtek India 42.55

Jain Irrigation Manufacturing irrigation System 42.02

Logix micro system Software Product Company 41.96


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Debt- Equity pattern Net Investments of FIIs :

Year Net Investments in

Equity (Rs. in Crores)

Net Investment in Debt

(Rs. in Crores)

1999 6176 120

2000 6386 316

2001 13025.6 217.8

2002 3629.1 1554.9

2003 30256.4 4838.6

2004 28168.31 3083

2005 31312 -5467

2006 36543 4051

2007 71486 9427

2008 -54828 24534

2009 83422 4564


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Category Date Buy Value Sell Value Net Value

FII 07-Sep-2010 2466.94 2487.82 -20.88

FII 06-Sep-2010 2750.18 1803.65 946.53

FII 03-Sep-2010 2016.26 1733.24 283.02

FII 02-Sep-2010 2036.77 1954.46 82.31

FII 01-Sep-2010 2683.31 2323.50 359.81

FII 31-Aug-2010 3120.17 2832.29 287.88

FII 30-Aug-2010 1418.88 1234.47 184.41

FII 27-Aug-2010 1811.62 1919.78 -108.16

FII 26-Aug-2010 3639.32 3915.94 -276.62

FII

25-A

ug-2010 2379.88 2744.84 -364.96FII 24-Aug-2010 2509.54 2318.49 191.05

FII 23-Aug-2010 2411.85 2093.62 318.23

FII 20-Aug-2010 2611.15 1948.29 662.86

FII 19-Aug-2010 3029.90 2208.72 821.18

FII 18-Aug-2010 3118.91 2444.39 674.52

FII 17-Aug-2010 3143.25 2739.16 404.09FII 16-Aug-2010 2753.66 2353.65 400.01

FII 13-Aug-2010 2452.25 2402.10 50.15

FII 12-Aug-2010 3212.88 2994.69 218.19

FII 11-Aug-2010 2722.70 2808.51 -85.81

FII 10-Aug-2010 3125.85 2526.52 599.33

FII 09-Aug-2010 2381.29 1859.17 522.12FII 06-Aug-2010 2668.91 2003.97 664.94


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(Rs. crore)

FII (BSE + NSE) DII (BSE +NSE)

Trade Date Buy Sales Net Buy Sales Net

23/8/10 2,411.85 2,093.62 318.24 1,249.56 1,409.34 -159.78

20/8/10 2,611.15 1,948.29 662.86 1,121.91 1,224.07 -102.15

19/8/10 3,029.90 2,208.72 821.19 1,303.15 1,088.06 215.09

18/8/10 3,118.91 2,444.39 674.52 1,579.43 1,692.94 -113.51

17/8/10 3,143.25 2,739.16 404.09 1,187.88 1,588.00 -400.12

16/8/10 2,753.66 2,353.65 400.01 1,168.44 1,602.35 -433.9113/8/10 2,452.25 2,402.10 50.15 1,625.92 1,592.54 33.37

12/8/10 3,212.88 2,994.69 218.19 1,403.35 2,059.40 -656.05

11/8/10 2,722.70 2,808.51 -85.82 1,784.22 1,760.72 23.50

10/8/10 3,125.85 2,526.52 599.33 1,066.24 1,606.91 -540.66

9/8/10 2,381.29 1,859.17 522.11 1,085.30 1,130.81 -45.50

6/8/10 2,668.91 2,003.97 664.95 954.93 1,295.52 -340.59

5/8/10 2,845.14 2,772.12 73.02 917.46 1,105.27 -187.81

4/8/10 2,715.70 2,027.01 688.68 1,016.87 1,292.76 -275.90

Cumulative since

11.4.2005 2,742,336.54 2,805,521.65 -63,185.10 1,026,835.49 900,648.25 126,187.24


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Reporting Date Debt/EquityInvestment

Route

Gross Purchases(Rs

Crores)

Gross Sales(Rs

Crores)

Net Investment (Rs

Crores)

Net Investment

US($) million

Total for October

Equity

Stock

Exchange23230.70 14939.60 8291.10 1852.93

Primary market &

others 1362.00 43.70 1318.30 294.85

Sub-total 24592.60 14983.60 9609.10 2147.79

Debt

Stock

Exchange3404.00 1915.40 1488.80 335.72

Primary market &

others0.60 1900.30 (1899.70) (424.59)

Sub-total 3404.70 3815.60 (411.00) (88.88)

Total 27997.30 18799.20 9198.10 2058.91

Total for 2010

Equity

Stock

Exchange520719.50 449893.50 70826.00 15487.90

Primary market &

others25118.20 1975.00 23143.30 5033.50

Sub-total 545837.69 451868.41 93969.30 20521.40

Debt

Stock

Exchange137866.41 89426.50 48440.00 10540.20

Primary market &

others23281.20 25545.50 -2264.30 -491.90

Sub-total 161147.50 114971.90 46175.70 10048.30

Total 706985.19 566840.31 140145.00 30569.70

Cumulative total

since

November 1992 till

October 06, 2010

Equity 4023145.00 3615338.25 407807.50 93132.80

Debt 408328.00 329893.59 78434.70 17509.50

Total 4431473.00 3945232.00 486242.19 110642.30


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06-OCT-2010 Index Futures 31454 975.44 54884 1700.45

Index Options 87056 2651.89 80580 2430.43

Stock Futures 39610 1211.08 75520 2387.54

Stock Options 12892 448.29 13774 472.6

Total for

October Index Futures 312809.00 9497.60 339909.00 10361.08

Index Options 645894.00 19290.68 586551.00 17413.22

Stock Futures 390387.00 12060.30 480051.00 14826.72

Stock Options 36219.00 1285.65 38262.00 1332.60

Total for 2010 Index Futures 18043828.00 476604.81 18558108.00 490217.50

Index Options 35497080.00 924960.50 30975330.00 808795.00

Stock Futures 17591448.00 534235.00 17688034.00 537730.12

Stock Options 1230689.00 42411.90 1434093.00 49822.70

Trends in FII Derivative Trades on 07/10/2010 in crores


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FII behavior during Financial Crisis 2008:

Months Net FIIs Rs in Crores Direction of Flow

January 17227 Negative

February 4882.6 Positive

March 124.5 Positive

April 975.2 Positive

May 4672.2 Negative

June 10577.5 Negative

July 1012.7 Negative

August 2065.7 Negative

September 7936.6 Negative

October 14248.6 Negative

November 3362.1 Negative

December 1629.3 Positive


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FIIs as major cause of market crash

( Jan 21 to Jan 29 2008)

The Indian capital markets have been left reeling under the

impact of liquidity crunch caused by multiple factors

It began with two mega issues of reliance power and future

capital holdings, which drew out huge amounts of money from

the market

FIIs withdraw from the capital market with more than

Rs 10000 crore


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Impact Of FIIs On Indian Markets

In the past four years there has been more than $41 trillion

worth of FII funds invested in India.

The present downfall of the market too is influenced as these

FIIs are taking out some of their invested money.

Long-term value investors v/s short term traders


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Appreciation of the rupee :

Higher forex reserves .

Creating wealth .

Direct effect on Inflation.

FII AND ECONOMY:


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Why there is need of FII ?

FII flows supplements and augmented domestic savings and

domestic investment without increasing the foreign debt of our

country

Capital inflows to the equity market increase stock prices,

lower the cost of equity capital and encourage the investment

by Indian firms


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Why FII called good friend for good time

volatile in nature

In the Indian stock markets movement of the stock depends on

the limited no of stocks

As FIIs purchase and sell these stocks there is a high degree of

volatility in the stock market

If any set of development encourages outflow of capital that

will increase the vulnerability of the situation in the stock

market


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Determinants of Foreign Institutional

I

nvestment:

Equity returns

Risk

Inflation

Exchange rate


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Foreign Institutional Investment: A

Cost Benefit Analysis: Benefits:

Reduced cost of equity

Stability in the balance of payment

Knowledge flows

Strengthening corporate governance

Improving market efficiency


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Foreign Institutional Investment: A Cost

Benefit Analysis:

COSTS:

Herding and positive feedback training

Balance of payment vulnerability

Possibility of takeovers


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The Indian stock markets have really come of age there were so many

developments in the last 15 years that make the markets on par with the

developed markets.

The foreign capital is free and unpredictable and is always on the look

out of profits Flls frequently move investments, and those swings can

be expected to bring severe price fluctuations resulting in increasing

volatility.


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The growth of institutional investors in the market is having its own

advantages as well as its own share of problems on the brighter side

almost always purchase stocks on the basis offundamentals.

final presentation fii

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