Foreign Institutional Investment
Foreign Institutional Investment
Foreign Institutional Investment
India being a developing nation attracts the foreign flows looking at the growth potential in the Indian Economy. The FII's contribute a major chunk of volumes on the Indian bourses and this in turn impacts the market moves. In case of recession in the world economies, the foreign investors look for saver bets and India with a rising GDP where other nations GDP / Growth is shrinking has always offered greater investment avenues. Indian Markets have been the clear outperformers vis-a-vis the global markets in the past years.
Foreign Institutional Investment As defined by the European Union Foreign Institutional Investment is an investment in a foreign stock market by the specialized financial intermediaries managing savings collectively on behalf of investors, especially small investors, towards specific objectives in term of risk, return and maturity of claims. SEBIs Definition of FIIs presently includes foreign pension funds, mutual funds, charitable/endowment/university funds, asset management companies and other money managers operating on their behalf in a foreign stock market. Foreign institutional investment is liquid nature investment, which is motivated by international portfolio diversification benefits for individuals and institutional investors in industrial country. Currently, the following entities are eligible to invest under FII route:
Currently, entities eligible to invest under the FII route are as follows:
As FII: Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies, a trustee or power of attorney holder incorporated or established outside India proposing to make proprietary investments or with no single investor holding more than 10 per cent of the shares or units of the fund.
As Sub-accounts: The sub account is generally the underlying fund on whose behalf the FII invests. The following entities are eligible to be registered as sub-accounts, viz. partnership firms, private company, public company, pension fund, investment trust, and individuals. A domestic portfolio manager or a domestic asset management company shall also be eligible to be registered as FII to manage the funds of sub-accounts.
FIIs registered with SEBI fall under the following categories: Regular FIIs- those who are required to invest not less than 70 % of their investment in equity-related instruments and 30 % in non-equity instruments. 100 % debt-fund FIIs- those who are permitted to invest only in debt instruments.
Prohibitions on Investments: 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:
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)
FII Activity for previous years Year Gross Purchase Gross Sale 270,034.00 613,770.80 633,017.10 540,814.70 774,594.30 743,392.00 439,084.10 238,840.90 146,706.80 63,953.50 42,849.80 Net Investment 42,263.30 -2,714.20 133,266.80 83,424.20 -52,987.40 71,486.30 36,540.20 47,181.90 38,965.80 30,459.00 3,629.60
2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
312,297.50 611,055.60 766,283.20 624,239.70 721,607.00 814,877.90 475,624.90 286,021.40 185,672.00 94,412.00 46,479.10