FIIs refer to foreign institutional investors investing in India's financial markets. After a 1991 balance of payments crisis, India liberalized and allowed portfolio investments by FIIs for the first time. FIIs are regulated by SEBI and invest primarily in India's two largest stock exchanges, BSE and NSE. While FIIs have benefited the Indian economy through increased capital flows and improved corporate governance, they also introduce volatility, as seen during market falls caused by FII withdrawals. Overall, FIIs have had a major impact on the Indian stock market and its movements often follow FII investment trends.

1. SUBMITTED BY
DAUD AHMAD KHAN
2K16GC109

2.  FII- Meaning.
 Advent of Liberalization & FIIs.
 Indian Capital Market – BSE & NSE.
 Investments by FIIs.
 Market Design in India for Foreign Institutional Investors.
 Prohibitions on Investments.
 Effects on Indian Economy .
 Conclusion.

3.  Institutional Investor is any investor that is registered in a
country or outside of the one in which it is currently
investing.
 The term “Foreign Institutional Investors” refers to outside
investors investing in the financial markets of India.
 There are 1484 FIIs and 38 foreign brokers registered to
Securities & Exchange Board of India.

4.  A Balance of Payments crisis in 1991 pushed the
country to near bankruptcy.
 Economic reforms were needed.
 The Government under its New Industrial Policy
revamped its foreign investment policy recognizing the
growing importance of foreign direct investment.
 Plus, for the first time portfolio investment by foreign
investors in Indian Capital Markets were permitted.

5.  In India, the purchase of domestic securities by FIIs was
first allowed in September 1992 as part of the liberalization
process that followed the balance of payment crisis in
1990-91.
 From September 14, 1992 with suitable restrictions, FIIs
were permitted to invest in all the securities traded on the
primary and secondary markets.
 The Indian market was integrated with the world economy
and international investors were invited to participate in
India.
 Consequently, the committee on “the reforms of the
financial system” under the chairmanship of Mr
Narsimham Rao was made which sought for reforms in the
financial sector.

6.  The Company Act of 1956 governs the securities market
in India.
 The Securities Contracts (Regulation) Act of 1956 and
the Securities and Exchange Board of India (SEBI) Act
of 1992.are the other body of rules that govern the
Indian capital markets.
 The changes in economic scenario(after the
liberalization) and the economic growth have raised the
interest of Indian as well as Foreign Institutional
Investors(FII’s) in the Indian capital market.
 Prime ones are BSE and NSE.

7.  The oldest(probably first) stock
exchange in Asia with a rich
heritage.
 22 agents started in 1875.
 The Sensex is an "index". An
index is basically an indicator.
 The BSE Sensex is a value-
weighted index composed of 30
stocks.

8.  In 1994 NSE was commenced
for speedy transactions.
 It encouraged small investors.
 Largest stock exchange
in India in terms of daily
turnover and number of trades
 The NSE's key index is
the S&P CNX Nifty, known as
the Nifty.
 Consists of 50 companies
representing 24 sectors of the
economy

9.  A FII may invest through 2 routes:
 Equity Investment
100% investments could be in equity related instruments
or up to 30% could be invested in debt instruments i.e.70
(Equity Instruments): 30 (Debt Instruments).
 Examples; Securities in the primary and secondary
market including shares which are unlisted, listed or
to be listed on a recognized stock exchange in India.
 Units of schemes floated by the Unit Trust of India
and other domestic mutual funds, whether listed or
not.
 Warrants

10.  100% Debt
100% investment has to be made in debt
securities only.
 Examples; Debentures (Non Convertible
Debentures, Partly Convertible Debentures etc.)
 Bonds
 Dated government securities
 Treasury Bills
 Other Debt Market Instruments

11.  Working Group for Streamlining of the Procedures relating
to Foreign Institutional Investors, constituted in April, 2003.
 It suggested that dual approval process of SEBI and RBI
be changed to a single approval process of SEBI.
 Implemented in December 2003.
 Currently, entities eligible to invest under the FII route are
as follows:
 As FII
 As Sub Accounts

12.  Foreign Institutional Investors are not permitted to
invest in equity issued by an Asset Reconstruction
Company.
 They are also not allowed to invest in any company
which is engaged or proposes to engage in the
following activities:
 Business of chit fund
 Nidhi Company
 Agricultural or plantation activities
 Real estate business or construction of farm houses (real
estate business does not include development of
townships, construction of residential/commercial
premises, roads or bridges).
 Trading in Transferable Development Rights (TDRs).

13.  Entities who propose to invest their proprietary funds or on behalf of
“broad based” funds or
 Of foreign corporate and individuals and belong to any of the under
given categories can be registered for Foreign Institutional Investors
(FII’s)
 Pension Funds
 Nominee Companies
 Institutional Portfolio Managers
 Trustees
 Power of Attorney Holders
 Banks
 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
 Asset Management Companies

14.  Changed the face of the Indian stock markets.
 Screen based trading and depository are realities
today .
 Equity research was something unheard of in the
Indian market a decade ago.
 It was FII which based the pressure on the rupee from
the balance of payments position and lowered the cost
of capital to Indian business.
 It is due to the FIIs that a concept like corporate
governance is being increasingly adopted by Indian
companies
 Benefiting domestic investors also.

15.  FIIs have become the driving force behind the
movements of the stock indices on the Indian stock
markets.
 Rolling settlement was introduced at the insistence of
FIIs-major beneficiaries of the rolling settlement
system are FIIs as short settlement cycles offer them
quick exit from the market.
 With the adoption of international practices, more
money will flow into the Indian capital market.

16.  The various reforms introduced by Indian government
to encourage FIIs to invest in Indian market.
 It have been effective to such an extent that in
November 2010 FIIs stood at 5426 cr whereas it stood
at 1713 cr in early 1990s.
 Positive Impact
 Enhanced flows of equity capital.
 Managing uncertainty and controlling risks
 Improving capital markets
 Improved corporate governance

17.  Negative Impact
 Potential capital outflows
 Inflation
 Problem to small investors
 Adverse impact on Exports
 Issue related to participatory notes

18.  From all the above discussions , we conclude
following;
 FIIs have major impact on Indian stock market.
 The impact is that even the domestic players and
MFs also follow a close look on FIIs.
 Therefore, if FIIs are confident in Indian markets,
there is a general perception that market is on a
song.

19.  Further money launders and even terrorists can use this facility
to pump money to Indian market and their sudden withdrawal
can cause volatility in markets.
 Falls in stock market were after effects of withdrawal of
money by FIIs.
 So there is a direct relation between the FII's money flow and
the movement of SENSEX.
 The biggest fall in stock markets occurred in 2007 and 2008.
 This means that the volatility of market was more because
during this period there was an increase in registration of FIIs
and the investments reached almost Rs. 280000Crores by
the end of 2007.

20. Thank You