International Economics Project

Presented To
Prof. R.L. Chawla

By:
Abhinandan Jakhar 043002
Anirudh Singh 043010
Sumeet Anand 043056
Vakul Sharma 043057
Vineet Badhu 043060
Don’t Wait For Panic
To Strike

Heavy FII Inflow In

India
FII – FOREIGN INSTITUTIONAL INVESTOR
Institutional investors are organizations which pool
large sums of money and invest those sums in
securities, real property and other investment
assets. They can also include operating companies
which decide to invest its profits to some degree in
these types of assets.

Types of 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.
Who can be registered as FII
 Pension Funds
 Mutual Funds
 Insurance Companies
 Investment Trusts
 Banks
 University Funds
 Charitable Trusts/Charitable Foundations
 Life Cycle
Uneven for Insurance funds

Long for pension Funds

From
From September
September 14,
14, 1992
1992 with
with suitable
FII in India
suitable restrictions,
restrictions, Foreign
Foreign
Institutional
Institutional Investors were permitted to invest in all the
Investors were permitted to invest in all the
securities
securities traded
traded on
on the
the primary
primary and
and secondary
secondary markets,
markets,
including
including shares,
shares, debentures
debentures andand warrants
warrants issued
issued by
by
companies
companies which were listed or were to be listed on the
which were listed or were to be listed on the Stock
Stock
Exchanges
Exchanges inin India.
India.

Before 1992 only NRIs and Overseas

Corporate Bodies were allowed
Advantages
●
Enhanced Flow of Equity capital
●
Non Debt Creating

Improved Corporate Governance

●

Equity market Development Aids

●

Economy Development
●
Cushion Current Account Deficit
●
Current Flow-With in 3 %

●
High Forex reserves
●
Easy Availability of Credit

Enhances competition in
●

The Financial Market

Disadvantages

●
High Inflation
●
Greater Demand as Increased wealth

●
Problem for Small Investors
●
Highly Volatile

●
Adverse Impact On Exports
●
Rupee appreciates
 HOT MONEY

Funds Controlled by
Investors who seek short
Term Returns
Why India ?
 Malaysia Chile

Successfully Implemented Curbs

with considerable Success
 FII Curbs In Thailand

Recently Thai cabinet imposed a 15%

withholding tax on capital gains and interest
payments for government and state-owned
company bonds in a clear signal that it would
not be a passive spectator to surging capital
inflows. Over the past few months overseas
flows have driven the Thai baht up 11% against
the dollar, the highest since the 1997-98 Asian
crisis.
capital controls are Stock Market
2006 Control
not always effective Crashed
 ‘There is nothing unusual about
capital inflows. We have not
reached the stage where the panic
button needs to be pressed. We
can always take action when
needed’
If the inflows are lumpy and volatile
or if they disrupt the macroeconomic
situation, we will intervene. Our
intervention will be to keep liquidity
conditions consistent with activity in
the real economy and to maintain
financial stability
 FII inflow 2010

17 billion $ in 2009 to 22 billion $

till Mid October 2010
QE 2
Inflation Concerns
 8.62 to 8.58

 Lowest 9 months value

Stock Market
Absorption Power
 No Checks Required till March 2011
 After that Some taxes may be imposed on the

profit repatriation by the FIIs if they tend to

destabilize the ECONOMY