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Fii
Fii
Fii
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WHAT IS FII?
Foreign institutional investor means an institution established or incorporated outside India which proposes to make investment in India in securities It is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India (SEBI) to participate in the market No controlling interest in the companies they invest in.
One who propose to invest their proprietary funds or on behalf of "broad based" funds or of foreign corporates and individuals and belong to any of the under given categories can be registered for FII. Pension Funds Mutual Funds Investment Trust Insurance or reinsurance companies Endowment Funds University Funds Foundations or Charitable Trusts or Charitable Societies who propose to invest on their own behalf, and Asset Management Companies Nominee Companies Institutional Portfolio Managers Trustees Power of Attorney Holders Bank
HOW TO APPLY
An application for registration has to be made in Form A, the format of which is provided in the SEBI(FII) Regulations, 1995 and submitted with under mentioned documents in duplicate addressed to SEBI as well as to Reserve Bank of India (RBI) and sent to the following address within 10 to 12 days of receipt of application.
Address for application The Division Chief FII Division Securities and Exchange Board of India, 224, Mittal Court, 'B' Wing, 1st Floor, Nariman Point, Mumbai - 400 021. INDIA
Eligibility
The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India. Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment. The applicant must be a "fit and proper" person. The applicant has to appoint a local custodian and enter into an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions. Payment of registration fee of US $ 5,000.00
FII Entrycontd
Whether the applicant is bank or institutional portfolio manager, established or incorporated outside India and proposing to make investments in India on behalf of broad based funds and its proprietary funds, a trustee of a trust established outside India and proposing to make investments in India on behalf of broad based funds and its proprietary funds Broad Based Funds: a fund, established or incorporated outside India At least twenty investors No single individual investor holding more than forty-nine per cent of the shares or units of the fund
Pull Factors
Domestic Pull factors - Reforms, strong economic fundamentals, Higher Interest Rates, good valuations, market liquidity, size, low trading cost, information dissemination External Push factors : Global liquidity, lower interest rates, higher risk appetite, lower relative growth.
Taxation
Nature of Income Tax Rate: 1.Short-term capital gains30% 2.Long-term capital gains10%. 3.Corporate dividend declared after June 01, 1997Nil 4.Interest Income20% Short-term Capital Gain: Capital gain on sale of a security held for a period of less than one year is termed as short-term capital gain Long-term capital gain: Capital gain on sale of a security held for period more than one year is termed as Long-term capital gain.
Why FII called good friend for good time volatile in nature
In the Indian stock markets movement of the stock depends on the limited no of stocks As FIIs purchase and sell these stocks there is a high degree of volatility in the stock market If any set of development encourages outflow of capital that will increase the vulnerability of the situation in the stock market In India there have been five such incidents in the recent past .
FII vs FDI
Where FDI is a bit of a permanent nature, FII flies away at the shortest political or economical disturbance Entry and Exit is relatively very easy for an FII as compared to FDI. Entry difficult for FDI because of infrastructure problems. Exit more difficult because of archaic labor laws Have been blamed for exacerbating small economic problems in a country by making large and concerted withdrawals at the first sign of economic weakness.
FDI vs FII.
FDI is more desirable than portfolio investment because the investments there under are made directly in the capital of the company and not in the secondary market
FDI helps in increasing production and employment , FII does not affect production and employment . 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 case of FDI it doesnt..