Presentation on FII and Stock M

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Presentation on FII and Stock M

  1. 1. A STUDY ON FII’S AND ITS IMPACT ON STOCK MARKET WORK CARRIED OUT FOR SBICAPS SECURITIES Faculty Guide Dr. B. Charumathi Presented by: Uday Doyal
  2. 2. Company Profile  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.
  3. 3. 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 Market
  4. 4. Research Methodology Research Type Analytical Source: NSE,BSE ,SEBI & Indiainfoline database Tools Used: •Correlation •Regression •ANOVA 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 Market
  5. 5. 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.
  6. 6. Advantage of FII inflows To reduction in information asymmetries Attracting foreign capital improves the breadth and depth of Indian markets financial innovation and development of hedging instruments rupee appreciates. Advantage
  7. 7. SEBI regulations for FII A Foreign Institutional Investor may invest only in the following:-  securities in the primary and secondary markets including shares,  units of schemes floated by domestic mutual funds including Unit Trust of India,  dated Government Securities;  derivatives traded on a recognized stock exchange 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.
  8. 8. 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
  9. 9. FII in India -10000 0 10000 20000 30000 40000 50000 -100,000.00 -50,000.00 0.00 50,000.00 100,000.00 150,000.00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13* Equity Debt
  10. 10. FII Net Investment (Equity + Debt) 0.00 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00 180,000.00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13* FII Net Investment Net Investment
  11. 11. FII Vs SENSEX for the year 2000-2013* 0.00 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 -100,000.00 -50,000.00 0.00 50,000.00 100,000.00 150,000.00 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net Investment BSE Sensex *till march 2013
  12. 12. FII Vs Nifty for the year 2000-2013* 0 1000 2000 3000 4000 5000 6000 7000 -100,000.00 -50,000.00 0.00 50,000.00 100,000.00 150,000.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Net Investment Nifty Closing Value *till march 2013
  13. 13. Analysis using SPSS Analysis FII & SENSEX FII & Nifty Correlation 0.675 0.678 R2 0.456 .460 Sig. Level 0.008 0.008 The variables are correlated Positively. There exists significant relationship between FII & Indian Stock Market
  14. 14. 0 5000 10000 15000 20000 25000 -3000 -2000 -1000 0 1000 2000 3000 4000 5000 6000 7000 2-Jul-12 16-Jul-12 30-Jul-12 13-Aug-12 27-Aug-12 10-Sep-12 24-Sep-12 8-Oct-12 22-Oct-12 5-Nov-12 19-Nov-12 3-Dec-12 17-Dec-12 31-Dec-12 14-Jan-13 28-Jan-13 11-Feb-13 25-Feb-13 11-Mar-13 25-Mar-13 8-Apr-13 22-Apr-13 6-May-13 20-May-13 3-Jun-13 17-Jun-13 Net FII Investment BSE FII & Sensex Data collected on daily basis 2012-13* *July 2012-June 2013
  15. 15. FII & Nifty Data collected on daily basis 2012-13* 0 1000 2000 3000 4000 5000 6000 7000 -3000 -2000 -1000 0 1000 2000 3000 4000 5000 6000 7000 2-Jul-12 9-Jul-12 16-Jul-12 23-Jul-12 30-Jul-12 6-Aug-12 13-Aug-12 20-Aug-12 27-Aug-12 3-Sep-12 10-Sep-12 17-Sep-12 24-Sep-12 1-Oct-12 8-Oct-12 15-Oct-12 22-Oct-12 29-Oct-12 5-Nov-12 12-Nov-12 19-Nov-12 26-Nov-12 3-Dec-12 10-Dec-12 17-Dec-12 24-Dec-12 31-Dec-12 7-Jan-13 14-Jan-13 21-Jan-13 28-Jan-13 4-Feb-13 11-Feb-13 18-Feb-13 25-Feb-13 4-Mar-13 11-Mar-13 18-Mar-13 25-Mar-13 1-Apr-13 8-Apr-13 15-Apr-13 22-Apr-13 29-Apr-13 6-May-13 13-May-13 20-May-13 27-May-13 3-Jun-13 10-Jun-13 17-Jun-13 24-Jun-13 Net FII Investment NSE *July 2012-June 2013
  16. 16. Analysis using SPSS Analysis FII & SENSEX FII & Nifty Correlation 0.232 0.247 R2 0.054 0.061 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 Market
  17. 17. FII & Sensex for the year 2008 & 2009(Month wise) 0.00 2,000.00 4,000.00 6,000.00 8,000.00 10,000.00 12,000.00 14,000.00 16,000.00 18,000.00 20,000.00 -20,000.00 -15,000.00 -10,000.00 -5,000.00 0.00 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 FII SENSEX
  18. 18. Analysis using SPSS Analysis FII & SENSEX Correlation 0.342 R2 0.117 Sig. Level 0.102 Correlation coefficient is positive. Only 11% of data are influenced There exists no significant relationship between FII & Indian Stock Market
  19. 19. Findings  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.
  20. 20. Conclusion  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

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