Financial- Institutional- Investors.pptx

Financial Institutional Investors

1. A PROJECT REPORT ON ANALYTICAL STUDY OF IMPACT OF FOREIGN INSTITUTIONAL INVESTOR SUBMITTED BY SHIVANI SHARMA

2. INTRODUCTION A  foreign institutional investor (FII) is an investor or investment fund registered in a country outside of the one in which it is  investors  most notably include investing. Institutional e hedge funds, insurance companies, pension funds and mutual funds.

3. TYPES OF FOREIGN INVESTMENT FII :- foreign institutional investor. FDI :- foreign direct investment . FPI :- Foreign Portfolio Investment. QFI :- Qualified Foreign Investment.

4. FDI vs FII Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct Investment is an investment that a parent company makes in a foreign country. On the contrary, FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign nation.

5. Influence of FII on Indian Market Positive fundamentals combined with fast growing markets have made India an attractive destination for foreign institutional investors (FIIs). For instance, when foreign institutional investors reduced their holdings in Dr. Reddy’s Lab by 7% to less than 18%, the company dropped from a high of around US$30 to the current level of below US$15. This 50% drop is apparently because of concerns about shrinking profit margins and financial performance..

6. PROHIBITION ON INVESTMENT Foreign institution investors are not permitted to invest in equity issed by 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 Agriculture or plantation activities Trading in transferable Development Rights

7. Entry Option for FII’S A foreign company planning to set up business operations in India has the following options. 1.Incorporated Entity By incorporating a company under the Companies Act,1956 through •Joint Ventures or   •Wholly Owned Subsidiaries Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy

8. 2. Important terms to know about FIIs Sub-account : Sub-account includes those foreign corporations, foreign individuals, and institutions, funds or portfolios established or incorporated outside India on whose behalf investments are proposed to be made in India by a FII. Designated Bank: Desi Bank means any bank in India which has been authorized by the Reserve Bank gated of India to act as a banker to FII. Domestic Custodian: Domestic Custodian means any entity registered with SEBI to carry on the activity of  providing custodial services in respect of securities. Broad Based Fund: Broad Based Fund means a fund established or incorporated outside India, which has at least twenty investors with no single individual investor holding more than 10% shares or units of the fund. Provided that if the fund has institutional investor(s) it shall not be necessary for the fund to have twenty investors. If the fund has an institutional investor holding more than 10% of shares or units in the fund, then the institutional investor must itself be broad based fund.

9. 3. Unincorporated Entity As a foreign Company through Liaison Office/Representative Office Project Office Branch Office 4. FOREIGN INSTITUTIONAL INVESTORS REGISTRATION Following entities / funds are eligible to get registered as FII: •Pension Funds •Mutual Funds •Investment Trust •Insurance or reinsurance companies •Investment Trusts •Banks •Endowments •University Funds •Foundations •Charitable Trusts or Charitable Society

10. Further, following entities proposing to invest on behalf of broad based funds, are also eligible to be registered as FIIs: •Asset Management Companies •Institutional Portfolio Managers •Trustees •Power of Attorney Holders. Supporting documents required are: •Application in Form A duly signed by the authorized signatory of the applicant. •Certified copy of the relevant clauses or articles of the Memorandum and Articles of Association or the agreement authorizing the applicant to invest on behalf of its clients •Audited financial statements and annual reports for the last one year , provided that the period covered shall not be less than twelve months. •A declaration by the applicant with registration number and other particulars in support of its registration or regulation by a Securities Commission or Self Regulatory Organization or any other appropriate regulatory authority with whom the applicant is registered in its home country. •A declaration by the applicant that it has entered into a custodian agreement with a domestic custodian together with participators of the domestic custodian. •A signed declaration statement that appears at the end of the Form. •Declaration regarding fit & proper entity

11. The fee for registration as FII is US $ 5,000. The mode of payment is Demand Draft infavour of  "Securities and Exchange Board of India" payable at New York”. SEBI generally takes 7 working days in granting FII registration. However, in cases where the information furnished by the applicants is incomplete, seven days shall be counted from the days when all necessary information sought, reaches SEBI. In cases where the applicant is bank and subsidiary of a bank, SEBI seeks comments from the Reserve Bank of India (RBI). In such cases, 7 working days would be counted from the day no objection is received from RBI. The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to be renewed. .

12. The FII registration application should be sent to: Securities and Exchange Board of India Division of FII & Custodian Mittal Court "B" Wing, First Floor  224, Nariman Point Mumbai 400 021 India.

13. Exchange Controls FIIs are required to open up one or more bank accounts with certain designated bank sand must also appoint a domestic custodian for custody of investment made by the FII. Through the designated accounts, FIIs are authorized to freely transfer funds from foreign currency accounts to Rupee accounts and vice versa; make Rupee denominated investments in Indian companies; freely transfer after-tax proceeds from Rupee accounts to foreign currency accounts, and repatriate capital, capital gain, dividends interest income and other gains, subject to deduction for applicable withholding taxes.

14. Investment Restrictions. Certain limitations apply to investments by FIIs into India. First, FIIs’ and their sub-accounts’ investment in an Indian company can not exceed ten percent (10%) of the total issued share capital of the Indian company (five percent if the subaccount is a foreign corporation or individual). FIIs may register with SEBI as a debt fund or an equity fund. FIIs which are registered as equity funds, are required to invest at leastseventy percent (70%) of their funds in equity and equity-related securities. A FIIregistered as a debt fund, on the other hand, must invest one hundred percent (100%) of its funds in debt instruments. . FIIs are not permitted to engage inshort selling, other than in respect of derivative securities traded over a recognized exchange, and must effect transactions through a registered stock broker. Sector investment prohibitions and caps which apply to foreign direct investment also apply to investments by FIIs, and FII investments must also comply with the pricing requirements applicable to foreign direct investment. In addition, FIIs are not permitted to investing print media.

15. Trend of FIIs with the help of economic figures: •In 2004, FII investments crossed $9 billion, the highest in the history of Indian capital markets. •The total net investment for the year up to December 29 stood at US$9,072million while foreign investors pumped in about US$2,113 million in December. •Korea and Taiwan have always been the biggest recipients of FII money. It  was only in 2004 that India managed to receive the second highest FII inflow at over $8.5bn . •On 9th March 2009, India's exceptional growth story and its booming economy have made the country a  favourite destination with foreign institutional investors (FIIs).It has continued to attract investment despite the Satyam non-governance issue and the global economic contagion impact on Indian markets. •According to Mr Gautam Chand , CEO of Instanex , said FIIs are the  largest institutional investors in India with holdings valued at over US$ 751.14 billion as on December 31, 2008 .•They are also the most successful portfolio investors in India with 102 per cent appreciation since September 30, 2003. •As per SEBI, number of registered FIIs stood at 1626 and number of registered sub-accounts stood at 4972 as on March 17, 2009.Future Prospects of Foreign Institutional Investments