INTERNATIONAL FINANCE

FOREIGN DIRECT Click to edit Master subtitle style INVESTMENT & FOREIGN PORTFOLIO INVESTMENT 2/16/13

WHAT IS FOREIGN INVESTMENT ?

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FOREIGN DIRECT INVESTMENT (FDI)

DETERMINANTS OF FDI SIZE OF THE MARKET POLITICAL STABILITY MACRO-ECONOMIC ENVIRONMENT LEGAL AND REGULATORY FRAMEWORK ACCESS TO BASIC INPUTS 2/16/13

CHARACTERSTICS OF FDI

INCLUDES INVESTMENT VARIOUS METHODS OF INVESTING CONTROLLING THE HOST COMPANY IS THE MAIN INTENTION LONG TERM COMMITMENT
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ACQUISITION OF 10% OR MORE OF THE

ADVANTAGES OF FDI

ECONOMIC DEVELOPMENT TECHNOLOGY TRANSFER EMPLOYMENT GENERATION HUMAN RESOURCE DEVELOPMENT

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DISADVANTAGES OF FDI

COMPETITION CULTURAL DIFFERENCES OWNERSHIP

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CLASSIFICATION OF FDI

INWARD FDI

OUTWARD FDI

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FOREIGN PORTFOLIO INVESTMENT (FPI)

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FOREIGN PORTFOLIO INVESTMENT

FOREIGN FUNDS DOMESTIC MARKET

INVEST

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FOREIGN PORTFOLIO INVESTMENT

INTERNATIONAL INVESTMENT IN FINANCIAL ASSETS IN DOMESTIC COUNTRY

INVESTMENTS IN:

STOCK AND BOND MARKETS MONEY MARKET INSTRUMENTS

FIIS INCLUDE:

EQUITY FUNDS
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ASSET MANAGEMENT COMPANIES

CHARACTERSTICS OF FPI

NO PARTICIPATION IN THE MANAGEMENT OF THE TARGET COMPANY GAIN FROM PROFIT MAKING OPPORTUNITIES FUND FLOWS ARE LESS PREDICTABLE NO INTERFACE BETWEEN THE INVESTOR AND THE MANAGEMENT.
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ADVANTAGES OF FPI

ENHANCED FLOWS OF EQUITY CAPITAL IMPROVED CORPORATE GOVERNANCE SUBSTANTIAL INCREASE IN THE SECONDARY MARKET

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DISADVANTAGES OF FPI

Political risk represented by the possibility of change in the political environment resulting in change in investment norms and repatriation regulations. Adverse Impact on Exports

FPI flows leading to appreciation of the currency may lead to the exports industry becoming un competitive due 2/16/13

FPI REGULATIONS IN INDIA

SEBI ACTS AS THE NODAL POINT IN THE REGISTRATION OF FIIS. ALL FIIS CANNOT ACQUIRE MORE THAN 24% OF THE PAID UP CAPITAL OF AN INDIAN COMPANY . A SEBI REGISTERED FII MAY PURCHASE DATED GOVERNMENT SECURITIES.
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FPI DETERMINANTS

INVESTORS' STRATEGIES HOST COUNTRY DETERMINANTS.

HOST COUNTRY DETERMINANTS:

ECONOMIC DETERMINANTS POLICY/REGULATORY DETERMINANTS.

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FDI

FPI

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WHAT IS INVESTED

transfer of non financial as well as financial assets. Multinational organizations

FDI F.D.I. Vs F.P.I.

FPI

Only investment of financial assets

COMES FROM

diverse sources eg. Mutual funds held by individuals, investments via equity instruments of a foreign enterprise. No active involvement in management.

INVOLVEMENT

ownership control

DURATION APPROACH BALANCE SHEET

Normally, it is a long term investment Direct transaction

Its a short term investment no direct interaction

There is impact on the balance sheet of No direct impact on the balance sheet the company of the company Leads to economic growth Makes foreign currency resources available to the country for economic development. Due to some problems associated with FPI most Governments impose restrictions/limitations on such investments.

desired by all Governments as a catalyst for economic growth.

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FDI IN INDIA
ROUTES FOR INWARD FLOWS OF FDI

AUTOMATIC ROUTE GOVERNMENT APPROVAL INDUSTRIAL LICENSING IN FDI POLICY RESTRICTED LIST OF SECTORS
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REGULATORY FRAMEWORK OF FDI

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OVERVIEW. RECENT REGULATORY CHANGES FACILITATING FDI. REGULATORY FRAMEWORK. FOREIGN INVESTMENT PROMOTION COUNCIL.

Click to edit Master subtitle style FACTORS CONTRIBUTING TO THE SLOW FLOW OF FDI INTO INDIA.
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FDI IN RETAIL

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FPI IN INDIA

In 1992, India allowed Foreign Portfolio Investment (FPI). India is still more dependent upon FPI than FDI as a source of foreign investment. 1992 to 2005- more than 50 percent of foreign investment in India came in the form of FPI.

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FPI AND ITS ROLE IN ECONOMIC DEVELOPMENT

Provide a developing country non-debt creating source of foreign investment. Increases the allocative efficiency of capital in a country. Gives an upward thrust to the domestic stock market prices- higher P/E ratio + lower cost of capital
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RECENT EVENTS

The Indian currency depreciated against USD last year by more than 20 per cent FY2012 till Nov 2011, India received about $1.01 billion in FPI $31 billion in fiscal 2/16/13 2011.

QUALIFIED FOREIGN INVESTORS (QFIS) IN INDIA

Government permits QFIs to directly invest in the stock market.

QFIs INCLUDE:

Individuals groups or associations resident in a foreign country Scheme to Help Increase the Depth of the Indian Market

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OU KY N THA

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