28252089 Foreign Institutional Investors
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Transcript of 28252089 Foreign Institutional Investors
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Presented By:xyz
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FIIAn institution that is a legal entity established or
incorporated outside India proposing to make investmentsin India only in securities.-SEBI
Types Of FII: -
Normal FII: Investment in equity & non equity instrument in the
ratio 70:30100% Debt FII: Invest in Government Securities or
Debentures/Bonds issued by an Indian Company
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Sensex V/S Rs-$ Exchange rate
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Lower InterestRate
Higher ExpectedEconomy Growth
Higher investment& consumption
Demand
Higher MoneySupply
Appreciating INR
Higher FII flow
FII flowsVirtuous Cycle
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Creation Of Liquidity
Lower Interest Rate
Higher Credit Off take
Higher Consumption
Rising Demand
INR Appreciates
RBI Buys USD
Conversion of
USD INR
By Bank
Wealth Effect, Higher
Assets Price
Higher Stock
Market Price
Higher FII Inflow
Higher Trade
Deficit
Capital AccountSurplus
Foreign Reserve
Accretion
Balance Of
Payment SurplusHigher Economy
Growth
FII & the financial system
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Benefits of FII flows
Increased capital availability
Increased liquidity in Stock market
Supplements domestic savings and investments
Increased forex reserves
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FII in INDIA
Foreign institutional investors (FIIs) have pumped
in Rs 20,117 crore (US$ 4.3 billion) into the
Indian equity markets in the month of May 2009
the highest in 19 months. Significantly, at US$ 1.04 trillion, India's market
capitalization (m-cap) has emerged as the ninth
largest in the world
SOURCE:- IBEF
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Growth Expected in India
To sustain the GDP growth of more than 8 percent, India requires an
investment of USD 1.5 trillion in the next five years
GDP USD 590 billion
GDP growth rate 9 %
Services contribution 54 %
FDI limit not 100 percent in majorindustry sectors such as Telecom,Semiconductors, Automobiles, etc.
Balance of Trade USD (-)46.2billion
Investment goal USD 250 billion
2006
GDP
USD 750 billion GDP growth rate 9.5%
Services contribution 60 %
FDI limit is expected to be close to100 percent in major industrysectors such as Telecom,Semiconductors, Automobiles, etc.
Balance of Trade
Shouldincrease with surging exports ascompared with imports
Investment goal USD 305 billion
2008
GDP USD 900 billion
GDP growth rate 9%
Services contribution 60-65 %
FDI limit is expected to be 100percent in major industry sectorssuch as Telecom,Semiconductors, Automobiles, etc.
Balance of Trade Should bepositive with increased level ofexports as compared with imports
Investment goal USD 370 billion
2010
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Issues & Problems
Problems of Inflation and Creation of Asset Bubbles,
Impact on Small Investors
Impact on Exports
Promotes short term investment than long term
Impact on Banking Institutions
Impact on Stock Market
Largest CreditConsumption cycle in India funded by FII flows
Real economy Impact-Currency, Interest rates, Bad Credit, Stock
Markets-Negative Wealth effects
Disorderly adjustments of imbalances-Financial Instability
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What can be done ?
Permit dollar settlements for FIIs
mitigate risks of currency fluctuations
improve the volume and liquidity of the derivatives market
Increase cap on G-Sec Bond Markets
Benefits of Global flows v/s the cost of instability.
Lock in Period Revise Normal FII Investment ratio
Participatory Notes- Actual Investor should come into picture
Option of converting Equity into Debt
Strong macro economic policy/reform framework
Strong regulatory framework, Corporate Governance
Strengthening the financial & banking system
Developing & deepening the currency & money markets
Allow INR to appreciate
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Thank You