Black Book

FOREIGN INSTITUTIONAL INVESTOR

SUBMIITED BY: NISHITA PRADEEP SOLANKI

TYBFM SEM (V)

PROJECT GUIDE:

PROF: URVI JAIN

SUBMITTED TO: UNIVERSITY OF MUMBAI Rajasthani sammlelan‟s Ghanshayamdas saraf college Affiliated to university of Mumbai Reaccredated by NAAC with „A‟ Grade R.S Campus, S.V. Road, Malad (West), Mimbai-400 064 A.Y. 2013-2014

DECLERATION MISS: NISHITA PRADEEP SOLANKI, A student of Ghanshyamdas Saraf College of Arts and Commerce, Malad (W). Here by states that I have completed my project on “FOREIGN INSTITUTIONAL INVESTOR” in the academic YEAR 2013-2014. This information submitted is true and original through best of my knowledge.

Date:

Signature of Student:

Rajasthani sammlelan‟s Ghanshayamdas saraf college Affiliated to university of Mumbai Reaccredated by NAAC with „A‟ Grade R.S Campus, S.V. Road, Malad (West), Mimbai-400 064 A.Y. 2013-2014

CERTIFICATE I, Prof.Urvi Pillay here certify that Ms.Nishita Pradeep Solanki, a student of Ghashyamdas Saraf college of Arts and Commerce has completed the project on “FOREIGN INSTITUTIONAL INVESTOR” in the academic YEAR 20132014. This information submitted is true and original through best of my knowledge.

External Examiner:

Principal:

Date:

Project co-ordinator: Date:

College seal:

ACKNOWLEDGEMENT

I take this opportunity to thank university of Mumbai for giving me a chance to do this project. I express my sincere gratitude to the principal Mrs.Sujata Karmarkar,course cocoordinators‟ Mr.Prasanna Choudhari, guide prof.Urvi Pillay ,librarian and other teachers for their constant support and helping me for completing my project. I am also great full to my friends for giving support in my project. Lastly I would like to thank each and every person who helped me in completing my project especially my parents.

Signature of student:

INDEX TOPIC Chapter 1 1.1 Executive summary 1.2 Objective of study 1.3 Introduction 1.4 History of financial institutional investors Chapter 2 2.1 Types of institutional investors 2.2 Regulatory overview 2.3 Advantages and Disadvantages 2.4 FII investment in India Chapter 3 3.1 Impact on stock exchange with special reference to BSE 3.2 Effects of Foreign institutional investors on Indian economy 3.3 BSE sensex & FII investment correlation Chapter 4 4.1 Review of literature 4.2 List of companies Chapter 5 5.1 Popular articles about foreign institutional invstors Chapter 6 6.1 Observation and Findings 6.2 Conclusion Bibliography

No.

Chapter-1

1.1EXECUTIVE SUMMARY

Executive Summery is a brief introduction of each chapter. It contains very few details of each chapter. Executive Summery is a very important because the reader or user can know the details; objective etc of the report is a very useful to them on. To complete the project successfully, following method was adopted. RESEARCH METHODOLOGY:

Research Design

:

Descriptive & Causal.



Sources of Data

:

Primary and Secondary

The success of the analysis mostly depends on the methodology on which it is carried out. The appropriate methodology will improve the validity of the findings. Data analysis of the project include Primary & secondary data. Frequency distribution charts are used while analyzing and number so achieved are presented in a percentage form so as to represent it through graph.

1.2OBJECTIVES OF THE STUDY

The study helps the student to check whether the theory and practice actually matches. Organizational exposure helps the student to know how effectively they performed in the market. Data is collected related to the foreign institutional investors of Indian capital market from the Security exchange board of India.

 To determine the part of foreign institutional investors.  To study in the concept of foreign institutional investors.  There may be shift in foreign institutional investor from equity market to debt market.  Contribution of FII‟s in the stock exchanges and Indian capital market.  Foreign institutional investors will have a great impact Indian economy .

1.3INTRODUCTION 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.” Institutional investors are entities that pool together funds on behalf of others, and invest those funds in a variety of different financial instruments and asset classes. Institutional investors control a significant amount of all financial assets in the United States, and exert considerable influence in all markets.

FOREIGN INSTITUTIONAL INVESTOR: The term Foreign Institutional Investor is defined by SEBI as under: "Means an institution established or incorporated outside India which proposes to make investment in India in securities. Provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor." Foreign Investment refers to investments made by residents of a country in financial assets and production process of another country. They are registered as FIIs in accordance with Section 2 (f) of the SEBI (FII) Regulations 1995. Foreign Institutional Investor are allowed to subscribe to new securities or trade in already issued securities. Numerous institutional investors act as intermediaries between lenders and borrowers. As such, they have a critical importance in the functioning of the financial markets. Economies of scale imply that they increase returns on investments and diminish the cost of capital for entrepreneurs. Acting as savings pools, they also play a critical role in guaranteeing a sufficient diversification of the investors' portfolios. Their greater ability to monitor corporate behavior as well to select investor‟s profiles implies that they help diminish agency costs.Institutional investors will have a lot of influence in the management of corporations because they will be entitled to exercise the voting rights in a company. They can actively engage in corporate governance. Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under. Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management. Entities covered by the term „FII‟ include “Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies etc.(fund having more than 20 investors with no single investor holding more than 10 per cent of the

shares or units of the fund)” (GOI (2005).FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client accounts that the FII manages are known as „sub-accounts‟. The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with Securities & Exchange Board of India (SEBI) to participate in the market. One of the major market regulations pertaining to FII involves placing limits on FII ownership in Indian companies. They actually evaluate the shares and deposits in a portfolio. Typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. For instance, an ordinary person will have a pension from his employer. The employer gives that person's pension contributions to a fund. The fund will buy shares in a company, or some other financial product. Funds are useful because they will hold a broad portfolio of investments in many companies. This spreads risk, so if one company fails, it will be only a small part of the whole fund's investment. Institutional investors will have a lot of influence in the management of corporations because they will be entitled to exercise the voting rights in a company. They can actively engage in corporate governance. Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under. Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management.

1.4HISTORY OF FOREIGN INSTITUTIONAL INVESTOR

Ancient Rome and medieval Islam

Roman law ignored the concept of juristic person, yet at the time the practice of private evergetism (which dates to, at least, the 4th century BC in Greece) sometimes led to the creation of revenues-producing capital which may be interpreted as an early form of charitable institution. In some African colonies in particular, part of the city's entertainment was financed by the revenue generated by shops and baking-ovens originally offered by a wealthy benefactor. In the South of Gaul, aqueducts were sometimes financed in a similar fashion. The legal principle of juristic person might have appeared with the rise of monasteries in the early centuries of Christianity. The concept then might have been adopted by the emerging Islamic law. The waqf (charitable institution) became a cornerstone of the financing of education, waterworks, welfare and even the construction of monuments.Alongside some Christian monasteries the waqfs created in the 10th century AD are amongst the longest standing charities in the world (see for instance the Imam Reza shrine).

Pre-industrial Europe: Following the spread of monasteries, houses and other hospitals, donating sometimes large sums of money to institutions became a common practice in medieval Western Europe. In the process, over the centuries those institutions acquired sizable estates and large fortunes in bullion. Following the collapse of the agrarian revenues, many of these institution moved away from rural real estate to concentrate on bonds emitted by the local sovereign (the shift dates back to the 15th century for Venice, and the 17th century for France and the Dutch Republic. The importance of lay and religious institutional ownership in the pre-industrial European economy cannot be overstated, they commonly possessed 10 to 30% of a given region arable land. In the 18th century, private investors pool their resources to pursue lottery tickets and tontine shares allowing them to spread risk and become some of the earliest speculative institutions known in the West.

Before 1980 Following several waves of dissolution (mostly during the Reformation and the Revolutionary period) the weight of the traditional charities in the economy collapsed; by 1800, institutions solely owned 2% of the arable land in England and Wales. New types of institutions emerged (banks, insurance companies), yet despite some success stories, they failed to attract a large share of the public's savings and, for instance, by 1950, they owned only 7% of US equities and certainly even less in other countries.

ARTER 1991 India opened its stock market to foreign investors in September 1992, and in 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. Initially, there were terms and conditions which restricted many FIIs to invest in India. But in the course of time, in order to attract more investors, SEBI has simplified many terms such as:• The ceiling for overall investment of FII was increased 24% of the paid up capital of Indian company. • Allowed foreign individuals and hedge funds to directly register as FII. • Investment in government securities was increased to US$5 billion. • Simplified registration norms.

2.1TYPES OF INSTITUTIONAL INVESTOR Institutional investors include public and private pension funds, insurance companies, savings institutions, closed- and open-end investment companies, and foundations.

ENDOWMENT FUND A financial endowment is a transfer of money and/or property donated to an institution. The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust. Among the institutions that commonly manage an endowment are academic institutions (e.g., colleges, universities, private schools), cultural institutions (e.g., museums, libraries, theaters, hospitals), and religious establishments. An endowment may come with stipulations regarding its usage. In some circumstances an endowment may be required to be spent in a certain way or alternatively invested, with the principal to remain intact in perpetuity or for a defined time period. This allows for the donation to have an impact over a longer period of time than if it were spent all at once.

MUTUAL FUND A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.[1] While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies." Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund. The term mutual fund is less widely used outside of the United States and Canada. For collective investment vehicles outside of the United States, see articles on specific types of funds including open-ended investment companies, SICAVs, unitized insurance funds,unit trusts and Undertakings for Collective Investment in Transferable Securities, which are usually referred to by their acronym UCITS. In the United States, mutual funds must be registered with the Securities and Exchange Commission, overseen by a board of directors (or board of trustees if organized as a trust rather than a corporation or partnership) and managed by a registered investment adviser. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code. Mutual funds have both advantages and disadvantages compared to direct investing in individual securities. They have a long history in the United States. Today they play an important role in household finances, most notably in retirement planning. There are 3 types of U.S. mutual funds: open-end, unit investment trust, and closed-end. The most common type, the open-end fund, must be willing to buy back shares from investors every business day. Exchange-traded funds (or "ETFs" for short) are open-end funds or unit investment trusts that trade on an exchange. Open-end funds are most common, but exchangetraded funds have been gaining in popularity.

Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively managed. Investors in a mutual fund pay the fund‟s expenses, which reduce the fund's returns/performance. There is controversy about the level of these expenses. A single mutual fund may give investors a choice of different combinations of expenses (which may include sales commissions or loads) by offering several different types of share classes.

PENSION FUND A pension fund is any plan, fund, or scheme which provides retirement income. Pension funds are important to shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold about $6 trillion in assets.[1] In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds,insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity.[2] Although the (Japan) Government Pension Investment Fund (GPIF) lost 0.25 percent, in the year ended March 31, 2011 GPIF was still the world's largest public pension fund which oversees 114 trillion Yen ($1.5 trillion).

HEDGE FUND A hedge fund is a collective investment scheme, often structured as a limited partnership, that invests private capital speculatively to maximize capital appreciation.[1]Hedge funds tend to invest in a diverse range of markets, investment instruments, and strategies; today the term "hedge fund" refers more to the structure of the investment vehicle than the investment techniques. Though they are privately owned and operated, hedge funds are subject to the regulatory restrictions of their respective countries.[2] U.S. regulations, for example, limit hedge fund participation to certain classes of investors (see accredited investors,[2] qualified purchasers) and also limit the total number of investors allowed in the fund. Hedge funds are often open-ended and allow additions or withdrawals by their investors. A hedge fund's value is calculated as a share of the fund's net asset value, meaning that increases and decreases in the value of the fund's investment assets (and fund expenses) are directly reflected in the amount an investor can later withdraw. Because hedge funds are not sold to the general public or retail investors, the funds and their managers have historically been exempt from some of the regulation that governs other funds and investment managers with regard to how the fund may be structured and how strategies and techniques are employed. Regulations passed in the United States and Europe after the 2008 credit crisis were intended to increase government oversight of hedge funds and eliminate certain regulatory gaps.

INSURANCE COMPANIES Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

INVESTMENT BANKING An investment bank is a financial institution that assists individuals, corporations, and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities). Unlike commercial banks and retail banks, investment banks do not take deposits. From 1933 (Glass– Steag all Act) until 1999 (Gramm–Leach–Bliley Act), the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G8 countries, have historically not maintained such a separation. As part of the Dodd-Frank Act 2010, Volcker Rule asserts full institutional separation of investment banking services from commercial banking. There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e. facilitating transactions, market-making), or the promotion of securities (i.e. underwriting, research, etc.) is the "sell side", while buy side is a term used to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds are the most common types of buy side entities. An investment bank can also be split into private and public functions with an information barrier which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information. An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities & Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.

INVESTMENT TRUST An investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies. The name is somewhat misleading, given that (according to law) an investment "trust" is not in fact a "trust" in the legal sense at all, but a separate legal person or a company. This matters for the fiduciary duties owed by the trustees and the equitable ownership of the fund's assets.

SOVEREIGN WEALTH FUND A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals, or other financial instruments. Sovereign wealth funds invest globally. Most SWFs are funded by foreign exchange assets. Some sovereign wealth funds may be held by a central bank, which accumulates the funds in the course of its management of a nation's banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings that are invested by various entities for the purposes of investment return, and that may not have a significant role in fiscal management. The accumulated funds may have their origin in, or may represent, foreign currency deposits, gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations that are typically held in domestic and (such as the dollar, euro, pound, and yen). Such investment management entities may be set up as official investment companies, state pension funds, or sovereign oil funds, among others. There have been attempts to distinguish funds held by sovereign entities from foreign-exchange reserves held by central banks. Sovereign wealth funds can be characterized as maximizing long-term return, with foreign exchange reserves serving short-term "currency stabilization", and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. Moreover it is widely believed most have diversified hugely into assets other than short-term, highly liquid monetary ones, though almost no data is publicly available to back up this assertion. Some central banks have even begun buying equities, or derivatives of differing ilk (even if fairly safe ones, like overnight interest rate swaps)

2.2REGULATORY OVERVIEW Agencies Regulate Foreign Institutional Investors (FII) In India   

RBI : The apex bank FIPB : Review all foreign investment proposals SEBI : Regulates India‟s capital market

APPLICABLE REGULATIONS Foreign Institutional Investors (hereinafter referred to as “FIIs”), including their applicable eligibility norms, registration requirements and permissible investment avenues and limits, are regulated by the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995

INIDICATIVE EVALUATION PARAMETERS ADOPTED BY SEBI BEFORE GRANTING “CERTIFICATEOF REGISTRATION”AS FII: 1. Applicant‟s track record, professional competence, financial soundness, experience, general reputation of fairness and integrity (the applicant should have been in operation for at least one year) 2. Whether the applicant is registered with, and regulated by, an appropriate Foreign Regulatory Authority, in the same capacity in which the application is filed with SEBI. 3. Whether the applicant has been granted permission under the provisions of the Foreign Exchange Management Act, 1999 by the Reserve Bank of India for making investments in India as a Foreign Institutional Investor. 4. Whether the applicant is a fit & proper person; Criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008

Application Procedure: Applicants intending to seek registration with SEBI as FIIs are required to file an application in Form A

Application Fee: Draft of US$ 10,000 in favor of „Securities and Exchange Board of India‟ payable in New York (payable at the time of submitting the application for registration)

Validity Period: Certificate of Registration granted (by SEBI) to FIIs is valid for a period of 3 years, after the expiry of which, an application for renewal of Registration must be made by the FII.

GRANT OF CERTIFICATE: Where an application is made for grant of certificate under these regulations, the Board shall, as soon as possible but not later than three months after information called for by it is furnished (if satisfied that the application is complete in all respects, and all Particulars sought have been furnished) and provided that the applicant is found to be eligible for the grant of certificate, grant a certificate in Form B, subject to payment of fees in accordance with the Second Schedule

I. INVESTMENTOPPORTUNITIES 1. Financial instruments available for FII investments: 

Securities in primary and secondary markets including shares, debentures and warrants of companies, unlisted, listed or to be listed on a recognized stock exchange in India;

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Units of mutual funds;

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Dated Government Securities, other debt instruments;

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Derivatives traded on a recognized stock exchange;

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Commercial papers.



Security Receipts

2. Investment limits on equity investments by FIIs 

Foreign Institutional Investors (FIIs) registered with SEBI and Non‐resident Indians (NRIs) are eligible to purchase shares and convertible debentures issued by Indian companies under the Portfolio Investment Scheme (PIS).



Total shareholding of each FII under this Scheme shall not exceed 10 per cent Of the total paid up capital or 10 per cent of the paid up value of each series of convertible debentures issued by the Indian company.

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Total holdings of all FIIs put together shall not exceed 24 percent of the paid‐up capital or paid‐up value of each series of convertible debentures. This limit of 24 per cent can be increased to the sectoral cap / statutory limit, as applicable to the Indian company.

3. Investment limits on debt investments by FIIs: 

Cumulative FII investments limit in Government debt –US$ 5 billion



Cumulative FII investments limit in Corporate debt –US$ 15 billion Specific methodologies, for allocation of the above‐mentioned overall limits and the time period within which allocated limits should be utilized by FIIs, have been laid down by SEBI and are periodically updated through Circulars and Notificati

2.3ADVANTAGES AND DISADVANTAGES

ADVANTAGES    

Increases Forex reserves Increases domestic savings Increases domestic investments Availability of capital reserve

In addition to FDI, Foreign Institutional Investment (FII) is also flowing into India. Qualified foreign entities (other than those predominantly owned by non resident Indians) seeking to undertake portfolio investments in India are regarded as Foreign Institutional Investors (FIIs). Eligible institutional investors that can register as FIIs include asset management companies, pension funds, mutual funds, banks, investment trusts, nominee companies, incorporated/institutional portfolio managers, power of attorney holders, university funds, endowment foundations, charitable trusts and charitable societies. Institutional investors are generally considered to be more proficient at investing due to the assumed professional nature of operations and greater access to companies and managements because of size. These advantages may have eroded over the years as information has become more transparent and accessible, and regulation has limited the amount and method of disclosure by public companies. 

Enhanced flows of equity capital



FIIs have a greater appetite for equity than debt in their asset structure. The opening up the economy to FIIs has been in line with the accepted preference for non-debt creating foreign inflows over foreign debt. Enhanced flow of equity capital helps improve capital structures and contributes towards building the investment gap.

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Managing uncertainty and controlling risks.

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FII inflows help in financial innovation and development of hedging instruments. Also, it not only enhances competition in financial markets, but also improves the alignment of asset prices to fundamentals.

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Improving capital markets.

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FIIs as professional bodies of asset managers and financial analysts enhance competition and efficiency of financial markets.

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Equity market development aids economic development.

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By increasing the availability of riskier long term capital for projects, and increasing firms‟ incentives to provide more information about their operations, FIIs can help in the process of economic development.

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Improved corporate governance.



FIIs constitute professional bodies of asset managers and financial analysts, who, by contributing to better understanding of firms‟ operations, improve corporate governance. Bad corporate governance makes equity finance a costly option. Also, institutionalization increases dividend payouts, and enhances productivity growth. 

Working with a foreign institutional investor can also have benefits for the economy in the nation where the company is active. Overseas investments can improve economic health, increase liquidity, and provide more opportunities for economic growth. This can help nations address problems like indebtedness while also promoting international cooperation and establishing potentially profitable business partnerships overseas. A foreign institutional investor can play a role in everything from trade negotiations to securing funding for government programs.



Some nations have put limits in place that are designed to protect their economies. A foreign institutional investor may be required to register and to demonstrate that it is a legitimate operation. Once registered, it may be referred to as “qualified,” and qualification may be needed to access many types of investments. Nations may also put limits on the percentage of foreign ownership that any given company can have, to avoid situations where domestic companies end up being owned primarily by foreign investors.

DISADVANTAGES    

Problem of inflation False representation of economy Problem for small investors Hot Money

FII investment is frequently referred to as hot money for the reason that it can leave the country at the same speed at which it comes in. You can visit the link below to see the Foreign Institutional Investors List 



Problems of Inflation: Huge amounts of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created. Problems for small investor: The FIIs profit from investing in emerging financial stock markets. If the cap on FII is high then they can bring in huge amounts of funds in the country‟s stock markets and thus have great influence on the way the stock markets behaves, going up or down. The FII buying pushes the stocks up and their selling shows the stock market the

downward path. This creates problems for the small retail investor, whose fortunes get driven by the actions of the large FIIs. 

Adverse impact on Exports: FII flows leading to appreciation of the currency may lead to the exports industry becoming uncompetitive due to the appreciation of the rupee.



Hot Money: “Hot money” refers to funds that are controlled by investors who actively seek short-term returns. These investors scan the market for short-term, high interest rate investment opportunities. “Hot money” can have economic and financial repercussions on countries and banks. When money is injected into a country, the exchange rate for the country gaining the money strengthens, while the exchange rate for the country losing the money weakens. If money is withdrawn on short notice, the banking institution will experience a shortage of funds. The first category will consist of government securities of USD 25 billion which merges USD 10 billion for investment limit in short-term government papers, including Treasury Bills, and USD 15 billion for long-term government papers. The second category is for the corporate debt with a limit of USD 51 billion, including a sublimit of USD 25 billion each for bonds of infrastructure sector and non-infrastructure sector, and USD 1 billion for QFIs (Qualified Foreign Investors) in non-infrastructure sector. "The above changes will come into effect from April 1, 2013," it said. Hit by high gold and petrol imports and slowdown in exports, current account deficit-- the difference between inflow and outflow of foreign currency-- touched a record high of 6.7 per cent in October-December period of 2012-13. The Current Account Deficit (CAD) can be financed only through foreign inflows, Finance Minister P Chidambaram had said. The eligible investors for these two categories are FIIs, QFIs and Long terms investors registered with SEBI-Sovereign Wealth Funds (SWFs), multilateral agencies, pension and insurance and central banks of other countries. In case of investment in G-secs category, eligible investors may invest in treasury bills only up to USD 5.5 billion within the limit of USD 25 billion. In the other category, investors may invest in commercial papers only upto USD 3.5 billion within the limit of USD 51 billion. However, it said, the Non-Resident Indians are not subject to any limit for investment in Government Securities as well as corporate debt. They will continue to be regulated as per existing guidelines. The Finance Ministry said in a separate statement that these sub-limits have been carved out based on the current holdings of such short term instruments by FIIs and have been provided so that existing investments are not adversely affected. Because of the room created by unifying categories, the current SEBI auction mechanism allocating debt limits for corporate bonds will be replaced by the 'on tap system' currently in place for infrastructure bonds.

FII VERSUS FDI According to the International Monetary Fund‟s Balance of Payments Manual 5, FDI is that category of international investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the investor in the management of the enterprise. According to EU law, foreign investment is labeled direct investment when the investor buys more than 10 per cent of the investment target, and portfolio investment when the acquired stake is less than 10 per cent. Institutional investors on the other hand are specialized financial intermediaries managing savings collectively on behalf of investors, especially small investors, towards specific objectives in terms of risk, returns, and maturity of claims. While permitting foreign firms/high net worth individuals in February, 2000 to invest through SEBI registered FII/domestic fund managers, it was noted that there was a clear distinction between portfolio investment and FDI. The basic presumption is that FII‟s are not interested in management control. To allay fears of management control being exercised by portfolio investors, it was noted that adequate safety nets were in force, for example,    

Transaction of business in securities on the stock exchanges are only through stock brokers who have been granted a certificate by SEBI, Every transaction is settled through a custodian who is under obligation to report to SEBI and RBI for all transactions on a daily basis, Provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Monitoring of sectoral caps by RBI on a daily basis.

2.4FII INVESTMENT IN INDIA

FII Investment - Financial Year INR crores Financial Year

Equity

Debt

Total

1992-93

13

0

13

1993-94

5,127

0

5,127

1994-95

4,796

0

4,796

1995-96

6,942

0

6,942

1996-97

8,546

29

8,575

1997-98

5,267

691

5,958

1998-99

-717

-867

-1,584

1999-00

9,670

453

10,122

2000-01

10,207

-273

9,933

2001-02

8,072

690

8,763

2002-03

2,527

162

2,689

2003-04

39,960

5,805

45,765

2004-05

44,123

1,759

45,881

2005-06

48,801

-7,334

41,467

2006-07

25,236

5,605

30,840

2007-08

53,404

12,775

66,179

2008-09

-47,706

1,895

-45,811

2009-10

110,221

32,438

142,658

2010-11

110,121

36,317

146,438

2011-12

43,738

49,988

93,726

2012-13*

140,033

28,334

168,367

Total

628,377

168,467

796,844

* As on March 31, 2013

FII INVESTMENT DETAIL ( CALENDAR YEAR )

Monthly FII Net Investment INR crores Month

Equity

Debt

Total

Jan-12

10357.7

15971.2

26328.9

Feb-12

25212.1

10015.8

35227.9

Mar-12

8381.1

-6588.6

1792.5

Apr-12

-1109.1

-3787.5

-4896.6

May-12

-347.1

3569.1

3222

Jun-12

-501.3

1681.8

1180.5

Jul-12

10272.7

3391.7

13664.4

Aug-12

10803.9

265.2

11069.1

Sep-12

19261.5

622.5

19884

Oct-12

11364

7851.7

19215.9

Nov-12

9577.2

292.1

9869.3

Dec-12

24463.5

1704.4

26792.2

Total - 2012*

127736.2

34989.4

163350.1

BIDDING DETAIL

BIDDING DETAILS – FEBRUARY 20, 2013 Particulars

Govt Debt Govt Debt Corp Debt Old Corp Debt TOTAL Old LT LT

Total Available Limit (INR 1,919 Cr.)

33,959

3,866

26,925

66,669

Total amount bid for (INR 2,232 Cr.)

36,667

4,294

34,984

78,177

allocated 1,919

33,959

3,866

26,925

66,669

0

0

0

100%

100%

100%

49

21

43

122

131

Total amount (INR Cr.)

Amount left after auction 0 (INR Cr.) Percentage allocated

100%

Total no. of successful bids 9

Total no. of bids

10

50

22

49

Highest bid in bps

1.5

2

2.1

2

0.0281

0.2

0.38

Lowest successful bid in 1 bps Fee Amount (INR)

2,379,110

16,447,010 5,845,398

23,283,655 47,955,173

4.1IMPACT ON STOCK MARKET WITH SPECIAL REFERENCE TO BSE

ABSTRACT Foreign institutional investors have gained a significant role in Indian stock markets. The dawn of 21st century has shown the real dynamism of stock market and the various benchmarking of sensitivity index (Sensex) in terms of its highest peaks and sudden falls. In this context present paper examines the contribution of foreign institutional investment in sensitivity index (Sensex). Also attempts to understand the behavioral pattern of FII during the period of 2001 to 2010 and examine the volatility of BSE Sensex due to FII. The data for the study uses the information obtained from the secondary resources like website of BSE sensex. We attempted to explain the impact of foreign institutional investment on stock market and Indian economy. Also attempts to present the correlation between FII and BSE sensex by the Karl Pearson‟ Coefficient of correlation test.

INTRODUCTION FOREIGN INSTITUTIONAL INVESTOR: The term Foreign Institutional Investor is defined by SEBI as under: "Means an institution established or incorporated outside India which proposes to make investment in India in securities. Provided that a domestic asset management company or domestic portfolio manager who manages funds raised or collected or brought from outside India for investment in India on behalf of a sub-account, shall be deemed to be a Foreign Institutional Investor." Foreign Investment refers to investments made by residents of a country in financial assets and production process of another country. Entities covered by the term „FII‟ include “Overseas pension funds, mutual funds, investment Trust , asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies etc.(fund having more than 20 investors with no single investor holding more than 10 per cent of the shares or units of the fund)” (GOI (2005)). FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client accounts that the FII manages are known as „sub-accounts‟. The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with Securities & Exchange Board of India (SEBI) to participate in the market. One of the major market regulations pertaining to FII involves placing limits on FII ownership in Indian companies. They actually evaluate the shares and deposits in a portfolio.

WHY FIIS REQUIRED? FIIs contribute to the foreign exchange inflow as the funds from multilateral finance institutions and FDI (Foreign direct investment) are insufficient. Following are the some advantages of FIIs. • It

lowers cost of capital, access to cheap global credit.

• It supplements domestic savings and investments. • It leads to higher asset prices in the Indian market. • And has also led to considerable amount of reforms

in capital market and financial sector.

INVESTMENTS BY FIIS There are generally two ways to invest for FIIs.

• EQUITY INVESTMENT 100% investments could be in equity related instruments or up to 30% could be invested in debt instruments i.e.70 (Equity Instruments): 30 (Debt Instruments)

• 100% DEB 100% investment has to be made in debt securities only

EQUITY INVESTMENT ROUTE: In case of Equity route the FIIs can invest in the following instruments: A. Securities in the primary and secondary market including shares which are unlisted, listed or to be listed on a recognized stock exchange in India. B. Units of schemes floated by the Unit Trust of India and other domestic mutual funds, whether listed or not. C. Warrants

100% DEBT ROUTE: In case of Debt Route the FIIs can invest in the following instruments: A. Debentures (Non Convertible Debentures, Partly Convertible Debentures etc.) B. Bonds C. Dated government securities D. Treasury Bills E. Other Debt Market Instruments It should be noted that foreign companies and individuals are not be eligible to invest through the 100% debt route.

HISTORY OF FII India opened its stock market to foreign investors in September 1992, and in 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. Initially, there were terms and conditions which restricted many FIIs to invest in India. But in the course of time, in order to attract more investors, SEBI has simplified many terms such as:• The ceiling for overall investment of FII was increased 24% of the paid up capital of Indian company. • Allowed foreign individuals and hedge funds to directly register as FII. • Investment in government securities was increased to US$5 billion. • Simplified registration norms.

PROCEDURE FOR REGISTRATION: The Procedure for registration of FII has been given by SEBI regulations. It states- “no person shall buy, sell or otherwise deal in securities as a Foreign Institutional Investor unless he holds a certificate granted by the Board under these regulations”. An application for grant of registration has to be made in Form A, the format of which is provided in the SEBI (FII) Regulations, 1995.

THE ELIGIBILITY CRITERIA FOR APPLICANT SEEKING FII REGISTRATION IS AS FOLLOWS: Good track record, professional competence and financial soundness. • Regulated by appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. • Permission under the provisions of the Foreign Exchange Management Act, 1999 (FEMA) from the RBI. • Legally permitted to invest in securities outside country or its incorporation/establishment. • The applicant must be a „fit and proper‟ person. • Local custodian and designated bank to route its transactions. ELIGIBLE SECURITIES A FII can make investments only in the following types of securities: • Securities in the primary and secondary markets including shares, debentures and warrants of unlisted, to- be-listed companies or companies listed on a recognized stock exchange. • Units of schemes floated by domestic mutual funds including Unit Trust of India, whether listed on a recognized stock exchange or not, and units of scheme floated by a Collective Investment Scheme. • Government Securities

• Derivatives traded on a recognized stock exchange – like futures and options. FIIs can now invest in interest rate futures that were launched at the National Stock Exchange (NSE) on 31st August, 2009. • Commercial paper. • Security receipts

REGULATION RELATING TO FII OPERATION • Investment by FIIs is regulated under SEBI (FII) Regulations, 1995 and Regulation 5(2) of FEMA Notification No.20 dated May 3, 2000. SEBI acts as the nodal point in the entire process of FII registration. • FIIs are required to apply to SEBI in a common application form in duplicate. A copy of the application form is sent by SEBI to RBI along with their 'No Objection' so as to enable RBI to grant necessary permission under FEMA. • RBI approval under FEMA enables a FII to buy/sell securities on stock exchanges and open foreign currency and Indian Rupee accounts with a designated bank branch. • FIIs are required to allocate their investment between equity and debt instruments in the ratio of 70:30. However, it is also possible for an FII to declare itself a 100% debt FII in which case it can make its entire investment in debt instruments. • All FIIs and their sub-accounts taken together cannot acquire more than 24% of the paid up capital of an Indian Company. Indian Companies can raise the above mentioned 24% ceiling to the Sectoral Cap / Statutory Ceiling as applicable by passing a resolution by its Board of Directors followed by passing a Special Resolution to that effect by its General Body. Further, in 2008 amendments were made to attract more foreign investors to register with SEBI, these amendments are: • The definition of “broad based fund” under the regulations was substantially widened allowing several more sub accounts and FIIs to register with SEBI. • Several new categories of registration viz. sovereign wealth funds, foreign individual, foreign corporate etc. were introduced, • Registration once granted to foreign investors was made permanent without a need to apply for renewal from to time thereby substantially reducing the administrative burden, • Also the application fee for foreign investors applying for registration has recently been reduced by 50% for FIIs and sub accounts Also, institutional investors including FIIs and their sub-accounts have been allowed to undertake short-selling, lending and borrowing of Indian securities from February 1, 2008.

OBJECTIVES • To get the knowledge of stock market. • To find out the relationship between the FIIs investment and stock market. • To know the volatility of BSE Sensex due to FIIs. • To study the behavioral pattern of FII in India during 2000 to 2010.

HYPOTHESIS • There is close correlation between BSE Sensex volatility and FIIs.

INFLUENCE OF FII ON INDIAN MARKET Positive fundamentals combined with fast growing markets have made India an attractive destination for foreign institutional investors (FIIs). Portfolio investments brought in by FIIs have been the most dynamic source of capital to emerging markets in 1990s. At the same time there is unease over the volatility in foreign institutional investment flows and its impact on the stock market and the Indian economy. Apart from the impact they create on the market, their holdings will influence firm performance. 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. These instances made analysts to generally claim that foreign portfolio investment has a short term investment horizon. Growth is the only inclination for their investment. Some major impact of FII on stock market: • They increased depth and breadth of the market. • They played major role in expanding securities business. • Their policy on focusing on fundamentals of share had caused efficient pricing of share. These impacts made the Indian stock market more attractive to FII & also domestic investors. The impact of FII is so high that whenever FII tend to withdraw the money from market, the domestic investors fearful and they also withdraw from market.

NET INVESTMENT OF FII

Now we analyze the net investment graph from 2000-01 till Nov30,2011. From this, we can see that there is increase in net investment till 2005-06 and there was a small decrease in investment in the year 2006-07 and then again increase in 2007-08 and again decrease in 200809. But there was a steep increase in the year 2009-10,2010-11. This was the best period on Indian stock market where stock prices were increased and the market was in good mood.

4.2EFFECTS OF FII ON INDIAN ECONOMY Let us study the positive and negative impacts of this rise of investments by FIIs: POSITIVE IMPACT: It has imphasized upon the fact that the stock market reforms like improved market transparency, automation, dematerialization and regulations on reporting and disclosure standards were initiated because of the presence of FIIs. But FIIs flows can be considered both as the cause and the effect of stock market reforms. The market reforms were initiated because of the presence of them and this in turn has led to increased flow.

A. ENHANCED FLOWS OF EQUITY CAPITAL: FIIs are well known for greater appetite for equity than debt in their asset structure. For example, pension fund in the United Kingdom and United States had 68 per cent respectively of their portfolios in equity in1998. Not only it can help in supplementing for domestic saving for the purpose of development project like building economic and social infrastructure but can also help in growth of rate of investment, it boosts the production, employment and income of the host country.

B. MANAGING UNCERTAINTY AND CONTROLING RISKS: FIIs promote financial innovation and development of hedging instruments. These because of their interest in hedging risks, are known to have contributed to the development of zerocoupon bonds and index futures. These impacts made the Indian stock market more attractive to FII & also domestic investors.The impact of FII is so high that whenever FII tend to withdraw the money from market, thedomestic investors fearful and they also withdraw from market. C. IMPROVING CAPITAL MARKETS: FIIs as professional bodies of asset managers and financial analysts enhance competition and efficiency of financial markets. By increasing the availability of riskier long term capital for projects, and increasing firms‟ incentives to supply more information about them, the FIIs can help in the process of economic development. D. IMPROVED CORPORATE GOVERNANCE: Good corporate governance is essential to overcome the principal-agent problem between share-holders and management. Information asymmetries and incomplete contracts between share-holders and management are at the root of the agency costs. Bad corporate governance makes equity finance a costly option. With boards often captured by managers or passive, ensuring the rights of shareholders is a problem that needs to be addressed efficiently in any economy. Incentives for shareholders to monitor firms and enforce their legal rights are limited and individuals with small share-holdings often do not address the issue since others can freeride on their endeavor. FIIs constitute professional bodies of asset managers and financial analysts, who, by contributing to better understanding of firms‟ operations, improve corporate governance. Among the four models of corporate control - takeover or market control via equity, leveraged control or market control via debt, direct control via equity, and direct control via debt or relationship banking-the third model, which is known as corporate governance

movement, has institutional investors at its core. In this third model, board representation is supplemented by direct contacts by institutional investors.

NEGATIVE IMPACT: If we see the market trends of past few recent years it is quite evident that Indian equity markets have become slaves of FIIs inflow and are dancing to their tune. And this dependence has to a great extent caused a lot of trouble for the Indian economy. Some of the factors are: A. POTENTIAL CAPITAL OUTFLOWS: “Hot money” refers to funds that are controlled by investors who actively seek short-term returns. These investors scan the market for short-term, high interest rate investment opportunities. “Hot money” can have economic and financial repercussions on countries and banks. When money is injected into a country, the exchange rate for the country gaining the money strengthens, while the exchange rate for the country losing the money weakens. If money is withdrawn on short notice, the banking institution will experience a shortage of funds. B. INFLATION: Huge amounts of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created. This situation leads to excess liquidity thereby leading to inflation where too much money chases too few goods. C. PROBLEM TO SMALL INVESTORS: The FIIs profit from investing in emerging financial stock markets. If the cap on FII is high then they can bring in huge amounts of funds in the country‟s stock markets and thus have great influence on the way the stock markets behaves, going up or down. The FII buying pushes the stocks up and their selling shows the stock market the downward path. This creates problems for the small retail investor, whose fortunes get driven by the actions of the large FIIs. D. ADVERSE IMPACT ON EXPORTS: FII flows leading to appreciation of the currency may lead to the exports industry becoming uncompetitive due to the appreciation of the rupee.

BSE SENSEX AND FII INVESTMENT CORRELATION Sensex is the commonly used name for the Bombay Stock Exchange Sensitive Index – an index Composed of 30 of the largest and most actively traded stocks on the Bombay Stock Exchange (BSE). The term FII is used most commonly in India to refer to outside companies investing in the financial markets of India. FII investment is frequently referred to as hot money for the reason that it can leave the country at the same speed at which it comes in. In country like India; statutory agencies like SEBI have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs.

REVIEW OF LITRATURE 1. Stanley Morgan (2002) has examined that FIIs have played a very important role in building up India‟s forex reserves, which have enabled a host of economic reforms. Secondly, FIIs are now important investors in the country‟s economic growth despite sluggish domestic sentiment. The Morgan Stanley report notes that FII strongly influence short-term market movements during bear markets. However, the correlation between returns and flows reduces during bull markets as other market participants raise their involvement reducing the influence of FIIs. Research by Morgan Stanley shows that the correlation between foreign inflows and market returns is high during bear and weakens with strengthening equity prices due to increased participation by other players. 2. Agarwal, Chakrabartiet al (2003) have found in their research that the equity return has a significant and positive impact on the FII. But given the huge volume of investments, foreign investors could play a role of market makers and book their profits, i.e., they can buy financial assets when the prices are declining thereby jacking-up the asset prices and sell when the asset prices are increasing. Hence, there is a possibility of bi-directional relationship between FII and the equity returns. 3. P. Krishna Prasanna (2008) has examined the contribution of foreign institutional investment particularly among companies included in sensitivity index (Sensex) of Bombay Stock Exchange. Also examined is the relationship between foreign institutional investment and firm specific characteristics in terms of ownership structure, financial performance and stock performance. It is observed that foreign investors invested more in companies with a higher volume of shares owned by the general public. The promoters‟ holdings and the foreign investments are inversely related. Foreign investors choose the companies where family shareholding of promoters is not substantial. Among the financial performance variables the

share returns and earnings per share are significant factors influencing their investment decision. 4. Gurucharan Singh (2004) highlighted that the securities market in India has come a long way in terms of infrastructure, adoption of best international practices and introduction of competition. Today, there is a need to review stock exchanges and improve the liquidity position of various scrips listed on them. A study conducted by the World Bank (1997) reports that stock market liquidity improved in those emerging economies that received higher foreign investments.

5. Kumar (2001) investigated the effects of FII inflows on the Indian stock market represented by the Sensex using monthly data from January 1993 to December 1997. Kumar (2001) inferred that FII investments are more driven by Fundamentals and they do not respond to short-term changes or technical position of the market. In testing whether Net FII Investment (NFI) has any impact on Sensex, a regression of NFI was estimated on lagged values of the first difference of NFI, first difference of Sensex and one lagged value of the error correction term (the residual obtained by estimating the regression between NFI and Sensex). The study concluded that Sensex causes NFI. Similarly, regression with Sensex as dependent variable showed that one month lag of NFI is significant, meaning that there is causality from FII to Sensex..

LIST OF COMPANIES List of companies which have raised the ceiling from 10% in respect of NRIs investments under PIS (w.e.f. November 29, 2010) Upto 24% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Alembic Chemical Works Co. Ltd. Amar Investments Ltd., Calcutta. Anglo- India Jute Mills Co. Ltd. Arvind Mills, Ahmedabad. Ashima Syntex Ltd, Ahmedabad. Ashoka Viniyoga Ltd. Bharat Nidhi Ltd. BLB Shares & Financial Services Ltd BPL Ltd. Burr Brown (India) Ltd Camac Commercial Company Ltd. Ceenik Exports (India) Ltd. Cifco Finance Ltd., Mumbai. Classic Financial Services & Enterprises Ltd, Calcutta. CPPL Ltd, (Reliance Ind. Infrastructure Ltd) Mumbai.

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Crest Communication Ltd. CRISIL DCM Ltd. DCM Shriram Consolidated Ltd. Dharani Sugars & Chemicals Ltd Dolphin Offshore Enterprises ( I ) Ltd. Emco Ltd. Essar Oil Ltd. Essar Shipping Ltd., B‟lore Essar Steel Ltd. Eveready Industries India Ltd. Fabworth (I) Ltd. Federal Bank Ltd. Ferro Alloys Corporation Ltd., Tumsar. Gammon India Ltd

LIST OF COMPANIES IN WHICH FII INVESTMENT IS ALLOWED UPTO 30% OF THEIR PAID UP CAPITAL UNDER PIS 1 2 3 4 5

Asian Paints (India) Ltd Capital Trust Ltd Container Corporation of India Divi‟s Laboratories Ltd Ferro Alloys Corporation Ltd

6

Garware Polyester Ltd

7 8 9 10 11 12 13 14 15 16

GIVO Ltd (formerly KB & T Ltd) Mahindra Gesco Developers Ltd Orchid Chemicals and Pharmaceuticals Ltd Penta Soft Tec(Pentafour Communications Ltd) Polyplex Corporation Ltd Ranbaxy Laboratories Ltd Shasun Chemicals Ltd Sonata Software Ltd The Paper Products Ltd Vikas WSP Ltd

LIST OF COMPANIES IN WHICH FII INVESTMENT IS ALLOWED UPTO 40% OF THEIR Paid Up Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Adlabs Films Ltd. Aftek Infosys Ltd. Balaji Telefilms Ltd. Bharat Forge Ltd Burr Brown (India )Ltd Cipla Ltd. Elbee Services Ltd Glenmark Pharmaceuticals Ltd Gujarat Ambuja Cements Ltd HEG Ltd Hero Honda Motors Ltd Jindal Steel & Power Ltd Jyoti Structures Ltd Maars Software International Ltd Mount Everest Mineral Water Ltd Padmini Technologies Ltd. Rajasthan Spinning & Weaving Mills Ltd Rico Auto Industries Ltd. Shanti Gears Ltd. Silverline Technologies Ltd. Suven Life Sciences Ltd. The India Cements Ltd. The Indian Hotels Company Ltd Thiru Arooran Sugars Ltd. UTV Software Communications Ltd Visual Soft Technologies Ltd. Ways India Ltd. Shemaroo Entertainment Limited (w.e.f. 24.02.2012) Radico Khaitan Limited (w.e.f. 06.02.2013) Apollo Tyres Ltd.(w.e.f. February 14, 2013, updated 30 from earlier limit of 30%) Havells India Ltd (w.e.f. April 23, 2013, updated from 31 earlier limit of 24%) LIST OF COMPANIES IN WHICH FII INVESTMENT IS ALLOWED UPTO 49% OF THEIR Paid Up Capital 1 Alok Industries

2 Auribindo Pharma Ltd. 3 Arvind Mills Ltd 4 Balakrishna Industries Ltd 5 Blue Dart Express Ltd 6 CRISIL 7 Digital GlobalSoft Ltd. 8 Dr. Reddy‟s Laboratories Ltd. 9 D. S. Kulkarni Developers Ltd. 10 Federal Bank Ltd. 11 Financial Technologies (I) Ltd 12 HDFC Bank Ltd 13 Himachal Futuristic Communications Ltd. 14 Hindustan Lever Ltd. 15 Hughes Software Ltd. 16 ICICI Bank Ltd. 17 Ind-Swift Laboratories Ltd. 18 Karnataka Bank Ltd. 19 LIC Housing Finance Ltd. 20 Marksans Pharma Ltd. 21 Mahindra & Mahindra Ltd. 22 Mastek Ltd 23 Max India Ltd 24 McDowell & Co Ltd 25 NIIT Ltd. 26 NIIT Technologies Ltd.

27 Panacea Biotec Ltd. 28 Reliance Capital Ltd. 29 Reliance Energy Ltd. 30 Reliance Industries Ltd. 31 Reliance Petroleum Ltd. 32 SB & T International Ltd. 33 Sadbhav Engineering Limited 34 S. Kumars Nationwide Ltd 35 Soffia Software Ltd

LIST OF COMPANIES IN WHICH FII INVESTMENT IS ALLOWED UPTO SECTORAL CAP/STATUTORY CEILING OF THEIR PAID UP CAPITAL 1 2 3 4 5 6 7 8 9 10 11 12 13

AZTEC Software and Technology Services Ltd - (100%) Dynamatic Technologies Limited - (26%) (w.e.f.21.06.2013) Educomp Solutions Limited. –(100%) Gateway Distriparks Ltd - (100%) Geodesic Information Systems Ltd- (100%) Geometric Software Solutions Ltd – (100%) Gujarat NRE Coke Limited -(74%) HCL Infosystems Ltd. – (100%) Hexaware Technologies Ltd – (100%) Housing Development and Infrastructure Limited – (100%) Indiabulls Real Estate Limited –(100%) Indiabulls Financial Services Ltd – (100%) Indiabulls Securities Limited - (100%) Indiabulls Power Limited (100%) 14 (formerly Sophia Power Company Limited) 15 16 17 18 19 20

Infotech Enterprises Limited (100%) Infosys Technologies Ltd. – (100%) IVRCL Infrastructures & Projects Ltd (100%) India Infoline Ltd. (100%) Mascon Global Ltd. – (100%) Mphasis BFL Ltd – (100%)

21 Orbit Corporation Limited (100%) 22 23 24 25 26 27

Pentamedia Graphics Ltd.- (100%) Pentasoft Technologies Ltd. – (100%) Prajay Engineers Syndicate Limited – (100%) Punj Lioyd Limited (100%) IFCI Limited. (74%) Reliance Communications Ltd – (74%)

28 Sujana Metal Products Ltd - (100%) 29 Sujana Towers Limited-(100%) 30 Sujana Universal Industries Ltd - (100%)

LIST OF PRINT MEDIA COMPANIES IN WHICH FDI / FII INVESTMENT IS ALLOWED 1 Jagran Prakashan -26% 2 Deccan Chronicle Holdings Ltd – 24% (FIIs upto 14%) 3 IBN 18 Broadcast Ltd.-26% Companies in which overall FII ceiling has reached and no further purchases are allowed Companies falling under 24 % 1 Panyam Cements and Minerals Industries Ltd. 2 Elpro International Limited (wef 25.08.2011) 3 Voltamp Transformers Limited(wef 26-09-2012) 4 Pantaloon Retail (India) Limited( wef 23-1-2013) 5 City Union Bank Ltd (w.e.f.01.03.2013) Companies falling under 30 % None Companies falling under 49% limit None Companies where 38% FII limit has been reached and further purchases are allowed with prior approval of RBI.

None Companies where 28% FII limit has been reached and further purchases are allowed with prior approval of RBI. None Companies where 22% FII limit has been reached and further purchases will be allowed with prior approval of RBI 1 Grasim Industries Limited GSS Infotech Limited (GSS America Infotech Limited) (w. e. f. 25-92 2012) 3 CMC Ltd (w.e.f.30.04.2013) 4 Carborundum Universal Limited (w.e.f. 29-05-2013) 5 Pennar Industries Limited (w.e.f.03.07.2013) Companies where NRI/PIO Investment has already reached 10 % and no further purchases can be allowed 1 Chandraprabhu Housing Ltd 2 Coxswain Technology Ltd (Kaveri Biotech Ltd) 3 Dev Sugars Ltd 4 Dharendra Industries Ltd 5 DSQ Biotech Ltd 6 Fintech Communications 7 IQMS Software Ltd 8 Kakatiya Cement Sugar & Industries Ltd 9 10 11 12 13

Madras Aluminium Co. Ltd. SGN Telecom SPL Ltd. Squared Biotech Ltd Tai Industries Ltd. Goldcrest Finance (India) Limited (w.e.f. 14 14.11.2011) Khodiyar Industries Limited ( w. e. f. 17-0915 2012) Companies where the NRI investment has reached the trigger point of 8% and further purchases are allowed only with prior permission of RBI 1 Codura Exports Ltd 2 Cosmo Films Ltd

3 Dalmia Cement (Bharat) Ltd 4 Deccan Cements Ltd 5 Garden Silk Mills Ltd. 6 Nexus Software Ltd 7 8 9 10

Polyplex Corporation Ltd Premier Explosives Ltd Teledata Technology Solutions Limited (w.e.f.05.03.2013) Teledata Informatics Limited (Name changed to: Agnite Education Limited but not incorporated in BSE site) (w.e.f.05.03.2013) 11 Selan Exploration Technology Limited( w.e.f.14-06-2013) Companies in which the Ban limit in respect of maximum permissible foreign holding including GDR/ADR/FDI/NRI/PIO/FII Investment as stipulated by Government has been reached. 1

Dynamatic Technologies Limited (w.e.f. 21-062013)

Companies in which the Caution limit in respect of maximum permissible foreign holding including GDR/ADR/FDI/NRI/PIO/FII Investments as stipulated by Government has reached. None

Print Media Companies in which the Caution limit in respect of maximum permissible foreign holding including FDI/NRI/PIO/FII Investments as stipulated by Government has reached. None Print Media Companies in which the Ban limit in respect of maximum permissible foreign holding including FDI/NRI/PIO/FII Investments as stipulated by Government has reached. None

Public Sector banks in which 18% caution limit has been reached and further purchases by FIIs/NRIs/PIOs are allowed only with prior permission of RBI 1 Punjab National Bank

Private Sector Banks in which the Caution limit in respect of maximum permissible foreign holding including GDR/ADR/FDI/NRI/PIO/FII Investments as stipulated by Government has reached 1 ING Vysya Bank Limited (w.e.f. 06-06-2013)

Private Sector Banks in which the Ban limit in respect of maximum permissible foreign holding including GDR/ADR/FDI/NRI/PIO/FII Investments as stipulated by Government has reached 1 Axis Bank Ltd (w.e.f. 14.08.2013)

POPULAR ARTICLES ABOUT INSTITUTIONAL INVESTORS

1)Axis Bank surges over 5% as RBI lifts FII buying restriction ECONOMICTIMES.COM Sep 10, 2013, 09.49AM IST

Tags:      

RBI| FII buying| FII| Axis Bank Ltd.| Axis Bank



(The central bank has withdrawn…) MUMBAI: Axis Bank was witnessing buying action from institutional investors after the Reserve Bank of India allowed them to increase their holding in the stock. The RBI on September 04, 2013 notified that the foreign shareholdings through foreign institutional investors (Flls)/ non resident Indians (NRIs)/persons of Indian origin (PlOs)/foreign direct investment (FDI)/American Depository Receipts (ADRs)/Global Depository Receipts (GDRs) in Axis Bank have gone below the threshold limit stipulated under the extant FDI Policy. The central bank has withdrawn the restrictions placed on the purchase of shares of the bank with immediate effect. At 09:25 a.m. the stock was at Rs 1,002.25, up 5.12 per cent, on the BSE. It touched a high of Rs 1,013.85 and a low of Rs 977 in early trade.

2)SENSEX RALLIES OVER 250 POINTS; RUPEE BELOW 66/$ ECONOMICTIMES.COM SEP 6, 2013, 12.56PM IST

Tags:         

Tata Power| stock market| Sensex| SBI| Rupee| NSE| nifty| L&T| Jindal Steel|

       

Indian market| ICICI bank| Hindustan UniLever| Hero MotoCorp| Coal India| Cipla| BSE| Bharti Airtel

(The index breached 19,200…) MUMBAI: The S&P BSE Sensex bounced back from day's low as institutional investors resumed to lap up beaten down frontline stocks. The index breached 19,200 mark on the back of gains in pharmaceuticals, capital goods and banks. The sentiment among institutional investors turned bullish after a strong maiden speech by the new RBI governor Raghuram Rajan. The rupee has strengthened against the greenback as inflow continued in equity markets. The partially convertible rupee was at 65.71, up 30 paise, or 0.43 per cent, against its previous close of 66.12 per dollar. The foreign institutional investors bought shares worth Rs 1,101.41 crore while domestic institutional investors were net sellers worth Rs 492.82 crore on Thursday as per the provisional data from the National Stock Exchange. At 12:52 p.m.; the 30-share index was at 19,238.08, up 258.32 points or 1.36 per cent. It touched a high of 19,249.35 and a low of 18,929.38 in trade today.

The Nifty was at 5,665.4, up 72.45 points or 1.03 per cent. It touched a high of 5,673.80 and a low of 5,566.15 in trade today. "Nifty has managed to surpass the resistance of 5,550 levels which is a bullish signal and one should maintain a positive bias in the near term for an upside target of 5,650 & 5,720 levels," said Nirmal Bang report. "Bank Nifty formed a bullish pattern on the daily charts which has confirmed a positive bias. The index has managed to hold the crucial support and has bounced sharply from the oversold levels and we expect short term rise to 9,950 & 10,150 levels," the report added. Earlier at 12:20 pm, The S&P BSE Midcap Index was up 0.37 per cent and the S&P BSE Smallcap Index was up 0.51 per cent. Among the sectoral indices, the S&P BSE Healthcare Index was up 1.43 per cent, the S&P BSE Capital Goods Index gained 1.42 per cent and the S&P Bankex advanced 1.25 per cent. The S&P BSE Auto Index was down 0.43 per cent. ICICI Bank (4.91 per cent), Cipla (3.78 per cent), Jindal Steel (3.66 per cent), Bharti Airtel (2.62 per cent) and L&T (2.21 per cent) were among the major Sensex gainers. Coal India (2.98 per cent), Hindustan Unilever (2.21 per cent), Tata Power (2.13 per cent), Hero MotoCorp(1.34 per cent) and SBI (1.05 per cent) were among the top losers. The market breadth was positive on the BSE with 1,148 gainers against 818 losers.

3)POWER FINANCE CORP PLANS TO RAISE AT LEAST RS 150 CRORE VIA BONDS REUTERS. SEP 10, 2013, 10.01AM IST

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Power Finance Corp| Crisil ICRA| Care

(India's Power Finance Corp…) MUMBAI: India's Power Finance Corp plans to raise at least Rs 150 crore ($23 million) via a private placement of tax-free bonds, according to a termsheet. The issue is open to institutional investors and corporates, as per the document. The firm will issue 10-year tax-free bonds at 8.04 percent, 15-year bonds at 8.41 percent, and 20-year bonds at 8.40 percent, as per the document. The issue has a greenshoe option of 3.76 billion rupees and is rated AAA by Crisil, ICRA and Care rating agencies. Power Finance has scheduled the issue opening and closing for Friday.

4)SENSEX RANGEBOUND; SUN PHARMA, ONGC, NTPC DOWN ECONOMICTIMES.COM SEP 17, 2013, 02.45PM IST

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Wipro| Sun Pharma|

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stocks| Sensex| Rupee| RBI| NTPC| NSE| nifty| markets| L&T| HDFC| Fed| BSE

(Sensex continued to move…) MUMBAI: The S&P BSE Sensex continued to move in a narrow range as investors chose to stay on sidelines ahead of the US Fed and the RBI policy meet. As the market is facing resistance near the higher end of the trading range, some profit booking can't be ruled out if the RBI Governor Raghram Rajan takes hawkish stance, say analysts. At 02:30 p.m.; the 30-share index was at 19,718.90, down 23.57 points or 0.12 per cent. It touched a high of 19,809.28 and a low of 19,635.44 in trade today. The Nifty was at 5,829.50, down 11.05 points or 0.19 per cent. It touched a high of 5,853.95 and a low of 5,804.90 in trade today. The S&P BSE Midcap Index was down 0.42 per cent and the S&P BSE Smallcap Index was 0.20 per cent lower.

Among the sectoral indices, the S&P BSE IT Index was up 1.33 per cent, the S&P BSE Metal Index was 0.83 per cent higher and the S&P BSE Auto Index gained 0.83 per cent. The S&P BSE Power Index was down 1.33 per cent, the S&P BSE Bankex was 1.11 per cent lower and the S&P BSE Capital Goods Index slipped 1.09 per cent. Sun Pharma (3.30 per cent), ONGC (2.81 per cent), NTPC (2.45 per cent), HDFC (1.76 per cent) and L&T (1.37 per cent) were among the top Sensex losers. Wipro (4.32 per cent), Dr Reddy's Laboratories (3.88 per cent), Sesa Goa (2.82 per cent), Jindal Steel (2.06 per cent) and TCS (1.35 per cent) were among the gainers pack. The market breadth was positive on the BSE with 975 gainers against 1,231 losers. Foreign institutional investors(FIIs) bought shares worth Rs 282.87 crore while domestic institutional investors were net sellers worth Rs 425.17 crore on Monday as per the provisional data from the National Stock Exchange.