Fii Presentation11 091117065402 Phpapp01

7/30/2019 Fii Presentation11 091117065402 Phpapp01

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FIIs & DIIs Impact on Indian stock Market.

ByBLITZKRIEG
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STOCK MARKET


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STOCK MARKET

A public market for the trading of company stock andderivatives at an agreed price.

A place where people can buy and sell portions of businessescalled stocks.

The stocks are listed and traded on stock exchanges whichare entities of a corporation or mutual organization.

Though a number of other exchanges exist, NSE and BSEare the two most significant stock exchanges in India.


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BSE: BOMBAY STOCK EXCHANGE

The oldest stock exchange in Asia with a rich heritage.

The Sensex is an "index".An index is basically anindicator.

The BSE Sensex is a value-weighted index composed of 30 stocks.


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NSE: NATIONAL STOCK EXCHANGE.

Mumbai -based stock exchange .

Largest stock exchangein India in terms of daily turnover and number of trades

The NSE's key index is the S&PCNX Nifty, known as the Nifty.

Consists of 50 companiesrepresenting 24 sectors of theeconomy
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FII AND DII.Institutional Investor is any investor that is registered in acountry or outside of the one in which it is currently investing.

The term Foreign Institutional Investors refers to outsideinvestors investing in the financial markets of India.

There are 1484 FIIs and 38 foreign brokers registered toSecurities & Exchange Board of India.

The term Domestic Institutional Investors is used to refer tothe Indian investors investing in the Indian financial market.
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How FII started in India?

India opened its stock market to foreigninvestors in september 1992.since 1993,received portfolio investment

from foreigners in the form FII in equitiesIn order to trade in Indian equity market

foreign corporation need to register with SEBIas FII and shall comply with the ExchangeControl Regulations of RBI.
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Objectives of SEBI

>To protect the interest of the investors insecurities

>To promote the development of securitiesmarket>To regulate the securities market .


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SEBI regulates:

Primary marketsecondary marketmutual fundsFII's


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WHO CAN BE REGISTERED AS AN FII?

1. Pension Funds2. Mutual Funds3. Insurance Companies4. Investment Trusts5. Banks6. University Funds7. Foundations8. Charitable Trusts / Charitable Societies
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The fees for registration :

The fees for registration :US$5,000 for an FII accountUS$1,000 for each sub account.SEBI targets a timeline of 10 to 12 days for processing of FII applications.Valid for 5 years.
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In 1993, 12 FIIs got registered At the end of 1996-97, 439 FIIs wereregistered

In 2001, there were 482 foreign investorsregistered with Sebi.The number increased to 489 in 2002 and to

517 and 637 in 2003 and 2004 respectively.The total number should be around 1540.
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Where FII can invest?

Securities in primary and secondarymarkets including shares, unlisted,listed or to be listed on a recognizedstock exchange in India;
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FIIs Investments.Appreciation of the rupee :Higher forex reserves .Creating wealth .Direct effect on Inflation .


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Appreciation of the Rupee : Taking a closer look at thefunds flow, FIIs bring dollars to India which get converted into rupees inthe inter-bank foreign exchange market. As the supply of dollarsincrease, the law of demand-supply starts operating and the rupeeappreciates vis--vis the dollar .

Higher forex reserves : So, higher foreign (dollar)inflows into India usually translate into more rupee liquidity in thesystem. This increases the money supply and facilitates easy

availability of credit (loans) from banks


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Creating wealth: FII flows also aid in lowering the cost of borrowings. The easy availability of credit and the lower borrowingcosts increase consumption demand for housing, durables, cars andreal-estate. This higher demand often leads to greater public andcorporate investments, resulting in higher economic growth .

Direct effect on Inflation : This positive wealth effect alsooften leads to higher consumption and greater demand for other assetclasses such as gold, real-estate etc., which, in turn, fuels economicgrowth and inflation. Higher FII flows can, thus, be seen to help createwealth through higher asset prices
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Why there is need of FII ?

FII flows supplements and augmenteddomestic savings and domestic investmentwithout increasing the foreign debt of our

countryCapital inflows to the equity market increasestock prices, lower the cost of equity capitaland encourage the investment by Indian firmsThe expert group opines that FII inflows havesome savings like features
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Impact Of FIIs On Indian Markets

In the past four years there has been more than $41trillion worth of FII funds invested in India.The present downfall of the market too is influencedas these FIIs are taking out some of their invested

money.For long- term value investors, theres little becausefor worry but short term traders are adversely gettingaffected by the role of FIIs are playing at the present.
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Why FII called good friend for goodtime volatile in nature

In the Indian stock markets movement of thestock depends on the limited no of stocks

As FIIs purchase and sell these stocks there

is a high degree of volatility in the stockmarketIf any set of development encourages outflowof capital that will increase the vulnerability of

the situation in the stock marketIn India there have been five such incidents inthe recent past
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How they perform

The degree of volatility can be attributed to thefollowing reasons:The increase in investment by FIIs increases stockindices the stock prices and encourages further

investment . In this event when any correction takesplace the stock prices decline and there will be pullout by the FIIs in a large numbers as earning per share declinesThe FIIs manipulate the situation of boom in such amanner that they wait till the index rises up to acertain height and exit at an appropriate time. Thistendency increases the volatility further
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FIIs as major cause of market crash( Jan 21 to Jan 29 2008)

The Indian capital markets have been leftreeling under the impact of liquidity crunchcaused by multiple factors

It began with two mega issues of reliancepower and future capital holdings, which drewout huge amounts of money from the market

FIIs bowed out from the capital market withmore than Rs 10000 crore
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Total inflow and outflow of FII during Jan.21 to 29

Date Investment21 Jan. - 2425.722 Jan - 2256.223 Jan - 2499.24 Jan - 1351.225 Jan - 669.1

28 Jan - 1513.429 Jan - 285.1Total - - 9662
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In the past four years there has been more than $41trillion worth of FII funds invested in India. This hasbeen one of the major reasons on the bull marketwitnessing unprecedented growth with the BSESensex rising 221% in absolute terms in this spanThough there is a lot of value in this market andfundamentally there is a lot of upside in it. For long-term value investors, theres little because for worrybut short term traders are adversely getting affectedby the role of FIIs are playing at the present


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There are several reasons on FIIsselling

The swings in the market forced several FIIs to withdraw from India andinvest their dollars in other emerging markets. Some of the other markets include Uruguay, Russia, the Ukraine, and several other former Soviet countries. Though there have been swings in the pasttoo but FII response this time was different because of marginpressures back home as even they have to provide regular returns totheir investors.The Indian markets are not seen as a good short-term bet any more.India is seen as a good investment for the medium to long term. FIIsseem to fear the pace of growth and the fundamentals of the markets.Most FIIs are looking at corporate governance and execution abilities,which could be significant drivers in creating a strong portfolio of Indianstocks. Recent action taken by the market regulator indicates that theIndian government would like to moderate the inflow of FII money.


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Day (Points Loss in Sensex) Gross Purchases (Rs. Crores) Gross Sales (Rs. Crores) Net Investments (Rs. Crores)

21/01/2008 (1408) 3062.00 1060.30 2001.80

22/01/2008 (875) 2813.30 1618.20 1195.10

18/05/2006 (856) 761.80 527.40 234.40

17/12/2007 (826) 670.00 869.00 -199.00

18/10/2007 (717) 1107.00 1372.50 -265.50

18/01/2008 (687) 1077.20 1348.40 -271.20

21/11/2007 (678) 640.70 791.80 -151.10

16/08/2007 (643) 989.50 750.30 239.20

02/08/2007 (617) 534.50 542.00 -7.50

01/08/2007 (615) 809.40 956.90 -147.50


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Year Net Investment

2003 30458.7

2004 38965.1

2005 47181.2

2006 36539.7

2007 71486.5

2008 (10/08/08) -29169


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The Indian stock markets have really come of age therewere so many developments in the last 15 years thatmake the markets on par with the developed markets.

Theforeign capital is free and unpredictable and is alwayson the look out of profits Flls frequently moveinvestments, and those swings can be expected to bringsevere price fluctuations resulting in increasingvolatility.


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Thegrowth of institutional investors in the market is havingits own advantages as well as its own share of problemson the brighter side almost always purchase stocks onthe basis of fundamentals.


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Fii Presentation11 091117065402 Phpapp01

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