PRESENTED BY-

Sandipan Das.
How FII started in India?
What does it mean?
Who can be registered?
How to apply?
Eligibility criteria
Registration process
where FII can invest?
taxation
Need of FII
Impact in Indian market
Volatile in nature
How they perform?
FII vs FDI
Stock market crash












India opened its stock market to foreign investors in
September 1992
Since 1993, received portfolio investment from foreigners in
the form of foreign institutional investment in equities.
This has become one of the main channels of FII in India
for foreigners.
In order to trade in Indian equity market foreign
corporations need to register with SEBI as Foreign
Institutional Investor (FII).
Foreign institutional investor means an institution
established or incorporated outside India which
proposes to make investment in India in securities
It is used most commonly in India to refer to outside
companies investing in the financial markets of India.

One who propose to invest their proprietary funds or on behalf of "broad based"
funds or of foreign corporates and individuals and belong to any of the under given
categories can be registered for FII.

Pension Funds
Mutual Funds
Investment Trust
Insurance or reinsurance companies
Endowment Funds
University Funds
Foundations or Charitable Trusts or Charitable Societies who propose to invest on
their own behalf, and
Asset Management Companies
Nominee Companies
Institutional Portfolio Managers
Trustees
Power of Attorney Holders
Bank

An application for registration has to be made in Form A, the format of
which is provided in the SEBI(FII) Regulations, 1995 and submitted
with under mentioned documents in duplicate addressed to SEBI as
well as to Reserve Bank of India (RBI) and sent to the following address
within 10 to 12 days of receipt of application.

Address for application
The Division Chief
FII Division
Securities and Exchange Board of India,
224, Mittal Court, 'B' Wing, 1st Floor,
Nariman Point, Mumbai - 400 021.
INDIA.


As per Regulation 6 of SEBI (FII) 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.
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.
Payment of registration fee of US $ 5,000.00

Current financial instruments are available for FII
investments
Securities in primary and secondary markets including
shares, debentures and warrants of companies,
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 stock exchange ;
Commercial papers
Nature of Income Tax Rate:
1. Short-term capital gains30%
2. Long-term capital gains10%.
3. Corporate dividend declared after June 01, 1997Nil
4. Interest Income20%


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

YEAR PURCHASE
S
SALES RS.CR US$MN
2001-02 49920 41165

8755

1846
2002-03 47061 44371 2690 562
2003-04 144858 99094 45765 9950
2004-05 217911 171696 46215 10248
2005-06 165032 150886 14146 3262
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
The expert group opines that FII inflows have some
savings like features
In the past four years there has been more than $41 trillion
worth of FII funds invested in India.
This has been one of the major reasons on the bull market
witnessing unprecedented growth with the BSE Sensex
rising 221% in absolute terms in this span.
The present downfall of the market too is influenced as
these FIIs are taking out some of their invested money.
For long-term value investors, theres little because for
worry but short term traders are adversely getting affected
by the role of FIIs are playing at the present.
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
In India there have been five such incidents in the
recent past
The degree of volatility can be attributed to the
following reasons:
The increase in investment by FIIs increases stock indices
the stock prices and encourages further investment . In this
event when any correction takes place the stock prices
decline and there will be pull out by the FIIs in a large
numbers as earning per share declines
The FIIs manipulate the situation of boom in such a
manner that they wait till the index rises up to a certain
height and exit at an appropriate time. This tendency
increases the volatility further

Where FDI is a bit of a permanent nature, FII flies away at
the shortest political or economical disturbance
Entry and Exit is relatively very easy for an FII as compared
to FDI. Entry difficult for FDI because of infrastructure
problems. Exit more difficult because of archaic labor laws
have been blamed for exacerbating small economic
problems in a country by making large and concerted
withdrawals at the first sign of economic weakness.

FDI is more desirable than portfolio investment
because the investments there under are made directly
in the capital of the company and not in the secondary
market
FDI helps in increasing production and employment ,
FII does not affect production and employment .
FII investment is frequently referred to as hot money
for the reason that it can leave the country at the same
speed at which it comes in, in case of FDI it doesnt
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 bowed out from the capital market with more
than Rs 10000 crore

As result , the market came crashing down and in two days
Jan. 21 and 22 the market tumbled 2284 points from the
closing levels point of Friday (jan.18)
The highlight of this fortnight was historic intra-day
shedding of more than 2300 points on BSE on January 22
when trading was halted once at 10 % lower
The market again fell to 13 % during the trading session