A STUDY ON FII’S AND ITS IMPACT ON STOCK
WORK CARRIED OUT FOR SBICAPS SECURITIES
Presented by: Uday Doyal
SBICAP Securities Ltd (SSL) is a 100% subsidiary of SBI Capital Markets Ltd
SBI Capital Markets Ltd. commenced broking activities in March 2001
SBICAP Securities Ltd. (SSL) is a company, which has been formed to take over the broking
operations of SBI Capital Markets Ltd
It is an Depository participant, dealing with trading, demat and other allied services.
Objective of the Study
To study SEBI regulations on FIIs
To study the trend of FII investment in Indian equity and debt market
To examine the relationship between the FII investment and Indian Stock
Research Type Analytical
Source: NSE,BSE ,SEBI & Indiainfoline database
Tools Used: •Correlation
Package Used: Ms Excel and Statistical Package for Social Science (SPSS)
Period of Study: •Year 2000-Year 2013 (till March)
•Year 2008 & 2009 (Monthly)
•Year 2012-13 (July’12 to June’13)-Daily
Hypotheses H0: No significant relationship between FII & Stock Market
H1: There is significant relationship between FII & Stock
What is FII ?
According to SEBI, “a Foreign Institutional Investor ("FII") is as an
institution established or incorporated outside India which proposes to
make investment in India in securities of companies incorporated in
India (Indian Companies).”
FDI vs FII
Foreign direct investment (FDI) is a direct investment into production or
business in a country by a company in another country, either by buying a
company in the target country or by expanding operations of an existing
business in that country
FII is allowed to invest upto 10% of the paid up capital of a company, which
implies that any investment above 10% will be construed as FDI, though
officially such a definition does not exist.
Advantage of FII inflows
To reduction in
and depth of
SEBI regulations for FII
A Foreign Institutional
Investor may invest only
in the following:-
securities in the primary
and secondary markets
units of schemes floated
by domestic mutual
funds including Unit
Trust of India,
derivatives traded on a
Every FII/sub-account is required to
appoint a domestic Indian custodian to
hold in custody its Indian securities.
Custodian of Securities is a registered
and regulated entity by SEBI.
An FII can also invest in India on behalf of
a sub-account which is registered as a
sub-account under Section 2 (k) of the
SEBI (FII) Regulations, 1995.
FII in India
The regulations for foreign investment in India
have been framed by the Reserve Bank of India
in terms of Sections 6 and 47 of the Foreign
Exchange Management Act, 1999.
SEBI has been registering FIIs and
monitoring investments made by them
through the portfolio investment route
under the SEBI (FII) regulations 1995.
India, the second fastest growing economy
after China, has recently seen positive foreign
institutional investor (FII) inflows driven by the
sound fundamentals and growth opportunities
FII was allowed since September
1992, however, Investment by them were
ﬁrst made in January 1993
Analysis using SPSS
Analysis FII & SENSEX FII & Nifty
Correlation 0.232 0.247
Sig. Level 0.000 0.000
Correlation coefficient is very low. Only 6% of data are influenced
There exists significant relationship between FII & Indian Stock
Analysis using SPSS
Analysis FII & SENSEX
Sig. Level 0.102
Correlation coefficient is positive. Only 11% of data are
There exists no significant relationship between FII & Indian
Major portion of FII investments have come through the primary market, than
through buying via secondary markets
The FII over a longer time frame has greater impact on Stock market when
compared to short time frame.
FII can explain only about 50% of the movement of stock market.
In the year 2008-09, US economy was under recession , this might be cause of
declining FII in 2008.
In the year 2012-13, Indian economy have undergone many swings like running
inflation rate, falling rupee, rise in gold price. This all factors have greater impact on
stock market movement than FII.
Market size, Political scenario, Labour cost and productivity, Liberalized Trade
Policy, Infrastructure, Incentives and Operating conditions and Disinvestment
policy were the causes of FIIs investment in India.
FII invest in bulk .This cause herding behaviour among the DII’s .
FII investment in any company’s stock assumed to have growth potentials.
When FII sells more and purchase less the significance level gets reduce and thereby
reducing the association between FII and Stock Market