'Foreign Institutional Investor –( FII )

1. Foreign
Institutional
InvestorsSUBMITTED BY
SANKET G. KARNEKAR
ROLL NO.05
SUBMITTED TO
……………..
SUB.
FINANCIAL MANAGEMENT

2. Definition of
'Foreign Institutional Investor –( FII )
An investor or investment fund that is from or registered
in a country outside of the one in which it is currently
investing. Institutional investors include hedge funds,
insurance companies, pension funds and mutual funds.

3. How FII started in India?
 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).

4. Who are Foreign Institutional Investors (FIIs)?
Foreign Institutional investors (FIIs) are entities
established or incorporated outside India and make
proposals for investments in India. These investment
proposals by the FIIs are made on behalf of sub
accounts, which may include foreign corporates,
individuals, funds etcetera. In order to act as a banker
to the FIIs, the RBI has designated banks that are
authorized to deal with them. The biggest source
through which FIIs invest is the issuance of
Participatory Notes (P-Notes), which are also known
as Offshore Derivatives.

5. Can FIIs invest in Indian companies?
Yes, FIIs can invest in the stocks and debentures of the Indian
companies. In order to invest in the primary and secondary
capital markets in India, they have to venture through the
portfolio investment scheme (PIS). According to RBI
regulations, the ceiling for overall investment for FIIs is 24% of
the paid up capital of the Indian company. The limit is 20% of
the paid up capital in the case of public sector banks.
However, if the board and the general body approves and
passes a special resolution, then the ceiling of 24% for FII
investment can be raised up to sectorial cap for that particular
segment. In fact, recently SEBI allowed FIIs to invest in unlisted
exchanges as well, which means both BSE and NSE (the
unlisted bourses) can now allot shares to FIIs also.

6. Why are FIIs important for Indian Markets?
FIIs are among the major sources of liquidity for the Indian
markets. If FIIs are investing huge amounts in the Indian stock
exchanges then it reflects their high confidence and a healthy
investor sentiment for our markets. But with the current
global financial turmoil and a liquidity and credit freeze in the
international markets, FIIs have become net sellers (on a day
to day basis). The entry of FIIs in India has brought mixed
consequences for our markets, on one hand they have
improved the breadth and depth of Indian markets and on the
other hand they have also become the major sources of
speculation in testing times like these.

7. Registration process