A STUDY OF FIIs

IN INDIA

Saagar
Malhotra
Nitin Nath Singh
Nitin Kumar
Repalli Durga Babu

DECLERATION
This is to certify that this project titled A STUDY OF FIIS IN INDIA is an outcome of the
research work done by our team. This project has not been copied from any published source or
website. Our indebtedness to other works on the subject has been duly acknowledged at relevant
places

SIGNATURE OF MENTOR
STUDENTS

SIGNATURE OF

EXECUTIVE SUMMARY
Since Indian stock market is vast and attract investors as a hotspot of investment .The Indian
market is steadily growing and had allured domestic investors community and foreign investors
group in the past. The major part of investment in Indian market is attributed to institutional
investors among whom foreign investors are of primary importance. One eminent concern in the
matter is whether these foreign investors (FII) direct the Indian stock market. This study is
based on research on FII origination, FII policies, FII regulations,
trends, fluctuations of FII investment, and effects of FIIs on Indian markets
at different occasions. The objective of the study is to find out whether there exist relationship
between FII and Indian stock market.
The Foreign Institutional Investors (FIIs) have emerged as important players in the Indian equity
market in the recent past. This study makes an attempt to develop an understanding of the
dynamics of the trading behavior and the factors influencing FIIs and returns in the Indian equity
market by analyzing daily and monthly data. The study concludes that FIIs follow positive
feedback trading on a daily basis, while they follow negative feedback trading on a monthly
basis. But the main determinant remains lagged stock returns. The study concludes that FIIs
inflows in India are determined by stock market characteristics, macroeconomic factors and
international factors.

ACKNOWLEDGEMENT
We would like to take this opportunity to express our profound gratitude and deep regard to Mr.
Amitabh Gupta, for his exemplary guidance, valuable feedback and constant encouragement
throughout the duration of the project. His valuable suggestions were of immense help
throughout our project work. His perceptive criticism kept us working to make this project in a
much better way. Working under him was an extremely knowledgeable experience for us.

TABLE OF CONTENTS
TOPIC

PAGE NO:-

CHAPTER -1 - FOREIGN INSTITUTIONAL INVESTORS AND INDIA

INTRODUCTION

REVIEW OF LITERATURE

FOREIGN INVESTMENT & ITS NEED

10

TYPES OF FOREIGN INVESTMENT

10

ENTRY OF FIIS IN INDIA

11

WHAT MAKES INDIA AN ATTRACTIVE DESTINATION FOR FIIS?

11

CHAPTER 2 - REGULATORY FRAMEWORK FOR FIIs

REGULATION OF FIIS

15

WHO CAN BE REGISTERD AS FIIS ?

15

APPLICATION REQUIRED FOR FIIS

17

DOCUMENTS REQUIRED BY FIIS

18

ELIGIBILITY CRITERIA REQUIRED FOR FIIS REGISTARTION

18

CODE OF CONDUCT FOR FIIS

21

SUB ACCOUNT REGISTRATION

21

SEBI REGULATIONS FOR BEING REGISTERD AS SUB ACCOUNTS

22

TYPES OF SECURITIES IN WHICH FIIS CAN INVEST

22

INVESTMENT LIMITS ON EQUITY INSTRUMENTS BY FII/SUB ACCOUNTS

23

INVESTMENT LIMITS ON DEBT INSTRUMENTS BY FII/SUB ACCOUNTS

23

OTHER INVESTMENT OPPURTUNITIES

24

HOW THE SECURITIES SHOULD BE REGISTERED

25

FII POSITION LIMITS IN DERIVATIVE CONRACT (INDIVIDUAL STOCKS)

25

FII POSITION LIMITS IN INDEX DERIVATIVE CONTRACTS

26

FII POSITION LIMITS IN INTEREST RATE DERIVATES

26

OFFSHORE DERIVATIVES/PARTICIPATORY NOTES

27

EVOLUTION OF POLICY FRAMEWORK

28

CHAPTER 3- FIIs AND THE INDIAN ECONOMY

IMPACT OF FIIS ON STOCK MARKET

31

HOW DO FII FLOWS AFFECT VOLATILITY IN STOCK MARKET?

33

ROLE OF FIIS IN INDIAN ECONOMY - POSITIVE & NEGATIVE

35

CASE STUDIES

37

FII TOP PICKS

38

REGISTERED FIIS

39

CHAPTER - 4 - TRENDS AND ANALYSIS OF FII INVESTMENTS IN INDIA

GROSS PURCHASES, SALES AND NET INVESTMENT TRENDS

41

INVESTMENT TRENDS IN THE EQUITY AND DEBT SEGMENTS OF THE MARKET

44

INVESTMENTS TRENDS IN DIFFERENT SECTORS OF ECONOMY

46

FII INFLOWS IN INDIA CURRENT SCENARIO

50

FPI DAWN OF A NEW REGIME

51

CHAPTER 5 RESEARCH WORK

RESEARCH METHODOLOGY
INTERPRETATION OF THE RESULT

54
55

LIMITATINS OF STUDY

56

CONCLUSION

57

APPENDIX
BIBLIOGRAPHY

59

CHAPTER 1
FOREIGN INSTITUTIONAL
INVESTORS AND INDIA

INTRODUCTION
Foreign Institutional Investors have gained a very significant role in the Indian capital markets.
Positive fundamentals combined with fast growing markets have made India an attractive
destination for foreign institutional investors. In this context this paper examines the journey of
FIIs in India, the regulations related to them and the evolution of policy over the years. This
paper also analyses the impact of FII net flows on the stock market, their role and studies their
investment trend over the years.

REVIEW OF LITERATURE
In an effort to integrate Indian economy with the global economy foreign investments were
allowed in Indian capital markets from September 1992. This wave of liberalization resulted in
appreciation of stock price which was followed by inflow from foreign investors as said by
(Bekaert and Harvey, 1998 a,b) and (Henry, 1997).
The stock market shows more and more reaction to foreign investment as the economy
liberalizes. A concern with the entry of FIIs is that they are positive feedback traderstraders
who buy when the market increases and sell when the market falls. This acts as destabilizing
factor because the sales by FIIs lead the stock market to fall further and their buys increase the
stock market as concluded by (Dornbusch and Park, 1995), (Radelet and Sachs, 1998). Not only
this, these trades push the stock-prices away from the fundamentals as revealed by studies on
contemporaneous relation between FIIs investments and equity returns based on monthly data
(Bohn and Tesar, 1996, Berko and Clark, 1997).
(Choe et. al., 1998) examined the influence of FIIs on equity returns in Korea before and during
the 1997 Asian crisis and they found no evidence of stock prices falling because of a withdrawal
of foreign equity investment. Also, it is not necessary that inviting FIIs to the stock market would
increase its volatility as argued by (Rene and Stultz, 1997).
(Gordon and Gupta, 2003) observed that FIIs act as market makers and book profits by investing
when prices are low and selling when they are high. Hence, there are contradictory findings by
various researchers regarding the causal relationship between FII net inflows and returns of BSE/
NSE. Therefore, there is a need to investigate whether FIIs are the cause or effect of stock market
fluctuations in India.
(Karimullah) examined the impact of foreign institutional investor s FII equity
investment behavior in the Indian stock market. It attempts to find out the two-way causality
between foreign institutional investors (FIIs) behavior and performance of Indian stock market
for t h e p e r i o d o f J a n u a r y 1 9 9 7 t o J u n e 2 0 0 7 . t h i s a r t i c l e s e e k s t o e x a m i n e t h e
i d e a t h a t financial liberalization induces increased efficiency in the financial market as
permission of FIIs equity investment is an important example of financial
liberalization. Return in the stock market is used as proxy for the efficiency of the stock
market in India. A p a r t f r o m n e t investment of FIIs, the purchase and sales behavior of FIIs
are analyzed separately. The results indicate that stock market performance is a major
determinant of both the FIIs purchase and sales behavior. But we did not find strong
evidence that the variations in the stock market indices are determined by FIIs investment
behavior.

FOREIGN INVESTMENT AND ITS NEED

Foreign investment refers to the investments made by the residents of a country in the financial
assets or production processes of another country.
Foreign investment is important to most economies and is particularly vital for developing
countries. Developing countries, in most instances, have both the demand for a good or service,
and the labor and natural resources to supply it, but they lack the access to capital necessary to
begin producing. Thus, foreign investment bridges the gap between the funds that can be raised
internally and the need of funds in the country and provides essential capital to help spark the
creation of productive enterprises.

TYPES OF FOREIGN INVESTMENT

Foreign
Direct
Investme
nt

Official
Flows

Foreign
Investme
nts

Foreign
Portfolio
Investme
nt

Commerc
ial Loans

1. Foreign Direct Investment: Foreign direct investment (FDI) is a direct investment into
production or business in a country by an individual or company of another country, either by
buying a company in the target country or by expanding operations of an existing business in
that country.
2. Foreign Portfolio Investment: Foreign portfolio investment is the entry of funds into a
country where foreigners make purchases in the countrys stock and bond markets.
10

3. Commercial Loans: A commercial loan is a type of foreign investment that normally occurs
in the form of a bank loan. This kind of investment may occur between nations or between
businesses that are in different countries. While a commercial loan may be made by an
individual, it would normally occur between larger organizations.
4. Official Flows: The foreign investment known as official flow occurs between nations
instead of between companies. In cases of official flow, a more developed or economically
prosperous nation will invest money in a nation that is less developed. A recipient nation of
an official flow investment will typically receive financial support, as well as higher grade
technology and aid in government and economic management.

ENTRY OF FIIS IN INDIA

Until the 1980s, Indias development strategy was focused on self-reliance and importsubstitution. There was a general disinclination towards foreign investment or private
commercial ows.
1. Since the initiation of the reform process in the early 1990s, however, Indias policy stance
changed substantially, with a focus on harnessing the growing global foreign direct
investment (FDI) and portfolio ows.
2. As a part of the reforms process, the Government under its New Industrial Policy revamped
its foreign investment policy recognizing the growing importance of foreign direct
investment as an instrument of technology transfer, augmentation of foreign exchange
reserves and globalization of the Indian economy. Simultaneously, the Government, for the
first time, permitted portfolio investments from abroad by foreign institutional investors in
the Indian capital market.
3. From September 14, 1992 with suitable restrictions, Foreign Institutional Investors were
permitted to invest in all the securities traded on the primary and secondary markets,
including shares, debentures and warrants issued by companies which were listed or were to
be listed on the Stock Exchanges in India. While presenting the Budget for 1992-93, the then
Finance Minister Dr. Manmohan Singh announced a proposal to allow reputed foreign
investors, such as Pension Funds etc., to invest in Indian capital market.

WHAT MAKES INDIA AN ATTRACTIVE DESTINATION FOR FOREIGN

PORTFOLIO INVESTMENTS?
1

India is one of the fastest growing economies in the world and has emerged as a key destination
for foreign investors in recent years. Economic reforms initiated in 1991 have grown in scope
and scale and yielded increasingly salutary dividends. Today, India is perceived as one of the
most favorable investment destination in the world. Liberal policies, several economic sectors, a
globally competitive workforce, and rapid gross domestic product (GDP) and market growth
have been identified as the main drivers of foreign investment in India.
1 Source: http://www.investindia.gov.in/
11

1. Strong and robust economy: India has emerged as one of the most attractive destination not
only for investment but also for doing business in the recent years. One of the fastest growing
economies in the world which has not only sustained global downturn of 2008-09, India is
slated to grow at consistently higher rates during next few decades.
2. Demography: India not only supports one of the largest populations in the world, but also one
of the youngest. Fifty per cent of its population is below the age of 25 and two-thirds below
the age of 35. Also, about 65 per cent of Indians are in the working age group of 15 to 64
years, giving the country a significant edge in terms of cost competitiveness and low labour
costs. Moreover, Indias labour force has a strong knowledge base with a significant Englishspeaking population, making it a top destination for multinational corporations that are
looking to expand their overseas operations for market and talent. Two hundred and fifty
million people are set to join India's workforce by 2030. As a big chunk of the population
shifts into the working age group, the offshoot of that is an increase in disposable income and
conspicuous consumption.
3. Increase in consumer spending: Consumer spending in India grew from US$ 549 billion to
US$ 1.06 trillion between 2006 and 2011, putting India on the path to becoming one of the
worlds largest consumer markets by 2025. Indias consumption is expected to rise 7.3 per
cent annually over the next 20 years. By 2040, nine out of every ten Indians will belong to
the global middle class group with daily expenditures ranging between US$ 10 and US$
100 per person in todays purchasing power parity terms. Seventy per cent of this expenditure
will be on discretionary items like entertainment, healthcare, communication, education,
personal products, services and so on. The absolute number of Indias middle class will touch
1 billion by 2039, with its influence on global middle class consumption captured in the
figure below. This rise of Indias new middle class is globally significant as it will usher
fundamental changes in India and around the world by triggering waves of innovation in the
production, distribution and delivery of goods and services, including government services.
Innovations - like the US$ 2200 Nano car by Tata Motors, the inexpensive hand-held
electrocardiogram (ECG) machine from GE Healthcare, a low-cost water purifier called Tata
Swatch by Tata Chemicals, a battery-powered ChotuKool refrigerator by Godrej, and a
mobile phone application called Nokia Life Tools by Nokia for rural consumers to access
agricultural, educational and entertainment content - are some examples of frugal engineering
that are primarily aimed at the Indian market, but will likely find buyers in many other parts
of the world as well.
4. Foreign Direct Investment: Trends in Indias Foreign Direct Investment (FDI) are an
endorsement of its status as a preferred investment destination amongst global investors.
India's strengths span telecommunications, information technology, auto components,
chemicals, apparels, pharmaceuticals, and jewelry. Indias steady economic liberalization and
its embrace of the global economy have been key factors in attracting FDI. The government
recently opened up multi-brand retail and civil aviation markets to 51 and 49 per cent FDI
respectively and with more reforms expected in insurance and pension sectors, among others,
India will continue to offer compelling opportunities to the global investment community.
Some of the other factors which make India as a magnate of investments are:
12

13

Indian Governments constantly evolving investor friendly policy

Lower cost of production due to lower labour rates
Availability of skilled manpower
Abundant natural resources
English as one of the major business languages
Governments emphasis on infrastructure improvement
Indias location, close to markets of South East Asia, Middle East and also Europe.

CHAPTER 2
REGULATORY FRAMEWORK
FOR FIIs

14

REGULATION OF FIIS
FII flows to India formally began in September 1992 under the foreign portfolio investment
(FPI) scheme, when the Guidelines for Foreign Institutional Investment were issued by the
Government of India. In November 1995, the Securities and Exchange Board of India (SEBI)
enforced the Securities and Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995 (henceforth, referred to as SEBI FII Regulations) to regulate matters relating
to FII investment flows. At present, investment by FIIs is jointly regulated by this and Regulation
5(2) of the Foreign Exchange Management Act (FEMA), 1999.

WHO CAN BE REGISTERED AS AN FII?

In India, one who proposes to invest their proprietary funds or on behalf of "broad based" funds
or of foreign corporates and individuals and belongs to any of the below given categories can be
registered for FII.
Here, SEBI defines Broad Based Fund as, a fund established or incorporated outside India,
which has at least twenty investors with no single individual investor holding more than 10%
shares or units of the fund. Provided that if the fund has an institutional investor, it shall not be
necessary for the fund to have 20 investors.
Provided further that, if the fund has an institutional investor holding more than 10% of shares or
units in the fund, then the institutional investor must itself be broad based fund.
Following entities / funds are eligible to get registered as FII:
1. Pension Funds
2. Mutual Funds
3. Insurance Companies
4. Investment Trusts
5. Investment Banks
6. University Funds
7. Endowments
8. Foundations
9. Charitable Trusts / Charitable Societies
Further, the following entities proposing to invest on behalf of broad based funds are also
eligible to be registered as FIIs:
1. Asset Management Companies
2. Institutional Portfolio Managers
3. Trustees
15

4. Power of Attorney Holders

5. Nominee Companies
Some of the above mentioned types are described below.
PENSION FUNDS- Pooled contributions from pension plans set up by employers, unions or
other organizations to provide for the employees or members retirement benefits. It manages
pension and health benefits for employees, retirees, and their families. FII activity in India
gathered momentum mainly after the entry of CalPERS (California Public Employees
Retirement System), a large US-based pension fund in 2004.
MUTUAL FUNDS - A Mutual fund is a special type of investment institution that acts as an
investment conduit. It pools the savings, particularly of the relatively small investors, and invests
them in a well-diversified portfolio of sound investment. Mutual funds issue securities (known as
units) to the investors (known as unit holders) in accordance with the quantum of money
invested by them. The profits and losses are shared by the investors in proportion to their
investments.
INSURANCE COMPANIES - A company that offers insurance policies to the public, either by
selling directly to an individual or through another source such as an employee's benefit plan. An
insurance company is usually comprised of multiple insurance agents. An insurance company
can specialize in one type of insurance, such as life insurance, health insurance, or auto
insurance, or offer multiple types of insurance.
INVESTMENT TRUSTS - An Investment trust is a form of collective investment .Investment
trusts are closed-end funds and are constituted as public limited companies. A collective
investment scheme is a way of investing money with others to participate in a wider range of
investments than feasible for most individual investors, and to share the costs and benefits.
INVESTMENT BANKS - An investment bank is a financial institution that raises capital, trades
in securities and manages corporate mergers and acquisitions. Investment banks profit from
companies and governments by raising money through issuing and selling securities in capital
markets (both equity, debt) and insuring bonds (e.g. selling credit default swaps), as well as
providing advice on transactions such as mergers and acquisitions.
ENDOWMENT FUNDS - An investment fund set up by an institution in which regular
withdrawals from the invested capital are used for ongoing operations or other specified
purposes. Endowment funds are often used by nonprofits, universities, hospitals and churches.
They are funded by donations, which are tax deductible for donors. The principal in this fund
remains 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.
CHARITABLE TRUSTS OR CHARITABLE SOCIETIES- Trust created for advancement
of education, promotion of public health and comfort, relief of poverty, advancement of religion,
16

or any other purpose regarded as charitable in law. Benevolent and philanthropic purposes are
not necessarily charitable unless they are solely and exclusively for the benefit of public or
a class or section of it. Charitable trusts (unlike private or non-charitable trust) can have
perpetual existence and are not subject to laws against perpetuity. They are wholly or
partially exempt from almost all taxes.
ASSET MANAGEMENT COMPANIES - A Company registered with SEBI, which takes
investment/divestment decisions for the mutual fund, and manages the assets of the mutual fund.
Asset management companies provide investors with more diversification and investing options
than they would have by themselves.
INSTITUTIONAL PORTFOLIO MANAGERS - A portfolio manager is either a person who
makes investment decisions using money other people have placed under his or her control or a
person who manages a financial institution's asset and liability (loan and deposit) portfolios. On
the investments side, they work with a team of analysts and researchers, and are ultimately
responsible for establishing an investment strategy, selecting appropriate investments and
allocating each investment properly for a fund- or asset-management vehicle.
NOMINEE COMPANY- Company formed by a financial institution or another organization
which operates an account that holds assets and securities on behalf of the actual owner under the
terms of a custodial agreement.
POWER OF ATTORNEY HOLDERS- POA is an expression used to describe a document that
empowers a specified person or persons to act for and on behalf of the person executing it. The
person who executes a power of attorney is called the 'grantor', 'principal' or 'executant'. The
person to whom the POA is granted is called the 'constituted attorney', 'agent', 'grantee', or 'power
of attorney holder'. A POA can be granted in favor of one or more persons by the same
document.

APPLICATION FOR BEING REGISTERED AS FII

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.
This form is then submitted along with a fee of US $ 10000 payable through a Demand Draft in
favor of "Securities and Exchange Board of India" payable at New York.
Address for sending of application
Securities and Exchange Board of India
Division of FII & Custodian
Plot No. C4-A, G Block,
17

BandraKurla Complex,
Bandra (East), Mumbai 400 051

DOCUMENTS REQUIRED TO APPLY FOR FII REGISTERATION

Application in Form A duly signed by the authorized signatory of the applicant.

Certified copy of the relevant clauses or articles of the Memorandum and Articles of
Association or the agreement authorizing the applicant to invest on behalf of its clients
Audited financial statements and annual reports for the last one year, provided that the
period covered shall not be less than twelve months.
A declaration by the applicant with registration number and other particulars in support of
its registration or regulation by a Securities Commission or Self-Regulatory Organization
or any other appropriate regulatory authority with whom the applicant is registered in its
home country.
A declaration by the applicant that it has entered into a custodian agreement with a
domestic custodian together with particulars of the domestic custodian.
A signed declaration statement that appears at the end of the Form.
Declaration regarding fit & proper entity.

THE ELIGIBILITY CRITERIA FOR

REGISTRATION2

APPLICANT

SEEKING

FII

As per Regulation 6 of SEBI (FII) Regulations, 1995, Foreign Institutional Investors are required
to fulfill the following conditions to qualify for grant of registration:

Applicant should have track record, professional competence, financial soundness,

experience, general reputation of fairness and integrity;

The applicant should be regulated by an appropriate foreign regulatory authority in the

same capacity/category where registration is sought from SEBI. Registration with
authorities, which are responsible for incorporation, is not adequate to qualify as Foreign
Institutional Investor.

The applicant is required to have the permission under the provisions of the Foreign
Exchange Management Act, 1999 from the Reserve Bank of India.

2www.sebi.gov.in

18

Applicant must be legally permitted to invest in securities outside the country or its incorporation / 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.

The validity period for such a registration is 3 years. After expiry of 3 years, the registration
needs to be renewed by following the same procedure as illustrated above.

19

Duly Filled Form A with all the

required documents.

SEBI

YES

Is the Applicant bank or Banks

subsidiary

RBI

PROCESSING OF THE APPLICATION

NO
Is the applicant eligible?

NO

YES
Issue Registration
Certificate

Communicate the rejection with

reason and return fee.

The procedure of registration of an FII can be comprehensively illustrated through the flow chart

20

CODE OF CONDUCT FOR FIIs3

A Foreign Institutional Investor and its key personnel shall observe high standards of
integrity, fairness and professionalism in all dealings in the Indian securities market with
intermediaries, regulatory and other government authorities.
A Foreign Institutional Investor shall, at all times, render high standards of service,
exercise due diligence and independent professional judgment.
A Foreign Institutional Investor shall ensure and maintain confidentiality in respect of
trades done on its own behalf and/or on behalf of its sub-accounts/clients.
A Foreign Institutional Investor shall ensure the following: Clear segregation of its own
money/securities and sub-accounts money/securities.
Arms length relationship between its business of fund management/ investment and its
other business.
A Foreign Institutional Investor shall maintain an appropriate level of knowledge and
competency and abide by the provisions of the Act, regulations made thereunder and the
circulars and guidelines, which may be applicable and relevant to the activities carried on
by it. Every Foreign Institutional Investor shall also comply with award of the
Ombudsman and decision of the Board under Securities and Exchange Board of India
(Ombudsman) Regulations, 2003.
A Foreign Institutional Investor shall not make any untrue statement or suppress any
material fact in any documents, reports or information furnished to the Board.
A Foreign Institutional Investor shall ensure that good corporate policies and corporate
governance are observed by it.
A Foreign Institutional Investor shall ensure that it does not engage in fraudulent and
manipulative transactions in the securities listed in any stock exchange in India.
A Foreign Institutional Investor or any of its directors or manager shall not, either
through its/his own account or through any associate or family members, relatives or
friends indulge in any insider trading.
A Foreign Institutional Investor shall not be a party to or instrumental for creation of
false market in securities listed or proposed to be listed in any stock exchange in India;
price rigging or manipulation of prices of securities listed or proposed to be listed in any
stock exchange in India;
Passing of price sensitive information to any person or intermediary in the securities
market.]

SUB-ACCOUNT REGISTRATION
Sub-account includes those foreign corporates, foreign individuals, and institutions, funds or
portfolios established or incorporated outside India on whose behalf investments are proposed to
be made in India by a FII.
3www.sebi.gov.in

21

The following can get registered as sub accounts in India:

Institution or funds or portfolios established outside India, whether incorporated or not.

Proprietary fund of FII.
Foreign Corporates.
Foreign Individuals.

(A) foreign corporate means a body corporate incorporated outside India which fulfills the
following conditions:

its securities are listed on a stock exchange outside India;

it has asset base of not less than two billion US dollars;
it had an average net profit of not less than fifty million US dollars during the three
financial years preceding the date of the application.

(B) foreign individual means a foreigner who fulfills the following conditions:

has a net worth of not less than fifty million US dollars;

holds the passport of a foreign country for a period of at least five years preceding the
date of application;
holds a certificate of good standing from a bank;
is the client of the foreign institutional investor or any other entity which belongs to the
same group as the foreign institutional investor, for a period of at least three years
preceding the date of the application:

SEBI REGULATIONS FOR BEING REGISTERED AS A SUB- ACCOUNT

ARE

The FII should apply on the behalf of the Sub-account. Both the FII and the Sub-account
are required to sign the Sub-account application form.
"Annexure B" to "Form A" (FII application form) needs to be filled by the sub account
US $ 2,000 is to be submitted as the fee at the time of submitting the application through
a Demand Draft in the name of "Securities and Exchange Board of India" payable at New
York
OCBs / NRIs are not permitted to get registered as FII/sub-account

TYPES OF SECURITIES IN WHICH THE FIIs CAN INVEST:

22

The SEBI registered FIIs may invest in the following form of securities in India:

Primary and secondary market securities including shares, debentures and warrants of
companies unlisted, listed or to be listed on a recognized stock exchange in India

Units of schemes floated by domestic mutual funds, whether listed or not, units of
scheme

Floated by a Collective Investment Scheme

Dated Government Securities

Derivatives traded on recognized stock exchanges

Commercial paper

Security receipts

Indian Depository Receipts.

INVESTMENT LIMITS ON EQUITY INSTRUMENTS BY FII/SUBACCOUNT

FII, on its own behalf, shall not invest in equity more than 10% of total issued capital of
an Indian company.
Investment on behalf of each sub-account shall not exceed 10% of total issuedcapital of
an India company.
For the sub-account registered under Foreign Companies/Individual category, the
investment limit is fixed at 5% of total issued capital.

These limits are within overall limit of 24% / 49 % / 74% or the sectorial caps, as applicable and
prescribed by Government of India / Reserve Bank of India.

THE INVESTMENT LIMITS ON DEBT INVESTMENTS BY FII/SUBACCOUNT4

4www.sebi.gov.inwww.sebi.gov.in/faq/fiifaq.pdf

23

The FII investments in debt securities are governed by the policy of the Government of India.
Currently following limits are in effect:
For FII investments in Government debt, currently following limits are applicable:

100 % DEBT ROUTE

US $ 2.0 Billion

70:30 ROUTE

US $ 0.6 Billion

TOTAL

US $ 2.6 Billion

For corporate debt following limits are applicable:

100 % DEBT ROUTE

US $ 1.0 Billion

70:30 ROUTE

US $ 0.5 Billion

TOTAL

US $ 1.5 Billion

For Upper Tier II instruments following limits are applicable:

100 % DEBT ROUTE

US $ 390 Million

70:30 ROUTE

US $ 110 Million

TOTAL

US $ 500 Million

OTHER INVESTMENT OPPURTUNITIES

24

NORMAL FII (70:30 ROUTE)

100% DEBT FII

Total investment in equity and equity

related instruments shall not be less than
70% of aggregate of all investments.

100% investment shall be made in debt

security only.

HOW THE SECURITIES SHOULD BE REGISTERED.

In the name of FII when making investments on its own behalf
In the name of sub-account when making investments on behalf of Sub-account
In the name of "FII a/c sub-account" when making investments on behalf of Sub-account.

THE FII POSITION LIMITS IN DERIVATIVE CONTRACTS (INDIVIDUAL

STOCKS)5
The FII position limits in a derivative contract on a particular underlying stock i.e. stock option
contracts and single stock futures contracts are:
The FII position limits in a derivative contract on a particular underlying stock i.e. Stock option
contracts and single stock futures contracts are:

For stocks having applicable market-wise position limit (MWPL) of Rs.500 crores or more,
the combined futures and options position limit shall be 20% of applicable MWPL or Rs. 300
crores, whichever is lower and within which stock futures position cannot exceed 10% of
applicable MWPL or Rs. 150 crores, whichever is lower.
For stocks having applicable market-wise position limit (MWPL) less than Rs. 500 crores,
the combined futures and options position limit would be20% of applicable MWPL and
futures position cannot exceed 20% of applicable MWPL or Rs. 50 crore whichever is lower.

The gross open position across all derivative contracts on a particular underlying stock of a subaccount of a FII should not exceed the higher of:
5www.sebi.gov.in/faq/fiifaq.pdf

25

1% of the free float market capitalization (in terms of number of shares).

5% of the open interest in the derivative contracts on a particular underlying stock (in terms
of number of contracts).
This position limits would be applicable on the combined position in all derivative contracts on
an underlying stock at an exchange.

FII POSITION LIMITS IN INDEX DERIVATIVE CONTRACTS6

AT THE LEVEL OF THE FII

FII position limit in all index options contracts on a particular underlying index shall be Rs
500 Crore or 15 % of the total open interest of the market in index options, whichever is
higher, per exchange. This limit would be applicable on open positions in all option
contracts on a particular underlying index.

FII position limit in all index futures contracts on a particular underlying index shall be Rs.
500 Crore or 15 % of the total open interest of the market in index futures, whichever is
higher, per exchange. This limit would be applicable on open positions in all futures
contracts on a particular underlying index.

In addition to the above, FIIs shall take exposure in equity index derivatives subject to the following
limits:
i. Short positions in index derivatives (short futures, short calls and long puts) not exceeding (in
notional value) the FIIs holding of stocks.
ii. Long positions in index derivatives (long futures, long calls and short puts) not exceeding (in
notional value) the FIIs holding of cash, government securities, T-Bills and similar instruments.
Each Sub-account of a FII would have the following position limits:

A disclosure requirement for any person or persons acting in concert who together own 15%
or more of the open interest of all derivative contracts on a particular underlying index.

FII POSITION LIMITS IN INTEREST RATE DERIVATIVE CONTRACTS

AT THE LEVEL OF THE FII

6www.sebi.gov.in/faq/fiifaq.pdf

26

The notional value of gross open position of a FII in exchange traded interest rate derivative
contracts shall be:

US $ 100 million.

In addition to the above, the FII may take exposure in exchange traded in interest rate
derivative contracts to the extent of the book value of their cash market exposure in
Government Securities.

AT THE LEVEL OF THE SUB-ACCOUNT

The position limits for a Sub-account in near month exchange traded interest rate derivative
contracts shall be higher of:

Rs. 100 Cr

15% of total open interest in the market in exchange traded interest rate derivative contracts.

OFFSHORE DERIVATIVES/PARTICIPATORY NOTES7

FII/sub-account may issue, deal in or hold off-shore derivative instruments such as Participatory
Notes, Equity Linked Notes or any other similar instruments against underlying securities, listed or
proposed to be listed on any stock exchange in India.
ENTITIES ENTITALED TO INVEST IN PARTICIPATORY NOTES

Any entity incorporated in a jurisdiction that requires filing of constitutional and/or other
documents with a registrar of companies or comparable regulatory agency or body under
the applicable companies legislation in that jurisdiction;

Any entity that is regulated, authorized or supervised by a central bank, such as the Bank
of England, the Federal Reserve, the Hong Kong Monetary Authority, the Monetary

7www.sebi.gov.in/faq/fiifaq.pdf

27

Authority of Singapore or any other similar body provided that the entity must not only
be authorized but also be regulated by the aforesaid regulatory bodies;

Any entity that is regulated, authorized or supervised by a securities or futures

commission, such as the Financial Services Authority (UK), the Securities and Exchange
Commission (Sub-account), the Commodities Futures Trading Commission (Subaccount), the Securities and Futures Commission (Hong Kong or Taiwan), Australian
Securities and Investments Commission (Australia) or other securities or futures authority
or commission in any country , state or territory

Any entity that is a member of securities or futures exchanges such as the New York
Stock Exchange (Sub-account), London Stock Exchange (UK), Tokyo Stock Exchange
(Japan), NASD (Sub-account) or other similar self-regulatory securities or futures
authority or commission within any country, state or territory provided that the aforesaid
mentioned organizations which are in the nature of self-regulatory organizations are
ultimately accountable to the respective securities / financial market regulators.

Any individual or entity (such as fund, trust, collective investment scheme, Investment
Company or limited partnership) whose investment advisory function is managed by an
entity satisfying the criteria of (A), (B), (C) or (D) above.

EVOLUTION OF POLICY FRAMEWORK

Historical evolution of FII Policy is summarized below:

September 1992 FIIs allowed investing by the Government Guidelines in all securities in
both primary and secondary markets and schemes floated by mutual funds. Single FIIs to
invest 5 per cent and all FIIs allowed investing 24 per cent of a companys issued capital.
Broad based funds to have 50 investors with no one holding more than 5 per cent. The
objective was to have reputed foreign investors, such as, pension funds, mutual fund or

investment trusts and other broad based institutional investors in the capital market.
November 1996 100 per cent debt FIIs were permitted to give operational flexibility to
FIIs.

28

April 1997 aggregated limit for all FIIs increased to 30 per cent subject to special

procedure and resolution. The objective was to increase the participation by FIIs.
April 1998 FIIs permitted to invest in dated Government securities subject to a ceiling.
Consistent with the Government policy to limit the short-term debt, a ceiling of USD 1

billion was assigned which was increased to USD 1.75 billion in 2004.
June 1998 Aggregate portfolio investment limit of FIIs and NRIs/PIOs/OCBs enhanced
from 5 per cent to 10 per cent and the ceilings made mutually exclusive. Common
ceilings would have negated the permission to FIIs. Therefore, separate ceilings were

prescribed.
June 1998 Forward cover allowed in equity. FIIs permitted to invest in equity

derivatives. The objective was to make hedging instruments available.

February 2000 foreign firms and high net-worth individuals permitted to invest as subaccounts of FIIs. Domestic portfolio manager allowed to be registered as FIIs to manage

the funds of sub-accounts.

The objective was to allow operational flexibility and also give access to domestic asset

management capability.
March 2001 FII ceiling under special procedure enhanced to 49 per cent. The objective

was to increase FII participation

September 2001 FII ceiling under special procedure rose to sectorial cap.
December 2003 FII dual approval process of SEBI and RBI changed to single approval
process of SEBI. The objective was to streamline the registration process and reduce the

time taken for registration.

November 2004 Outstanding corporate debt limit of USD 0.5 billion prescribed. The

objective was to limit short term debt flows.

April 2006 outstanding corporate debt limit increased to USD 1.5 billion prescribed. The
limit on investment in Government securities was enhanced to USD 2 bn. This was an

announcement in the Budget of 2006-07

November, 2006 FII investment up to 23% permitted in infrastructure companies in the
securities markets, viz. stock exchanges, depositories and clearing corporations. This is a
decision taken by Government following the mandating of demutualization and

corporatization of stock exchanges.

January and October, 2007 FIIs allowed to invest USD 3.2 billion in Government
Securities (limits were raised from USD 2 billion in two phases of USD 0.6 billion each
in January and October)

29

June, 2008 while reviewing the External Commercial Borrowing policy, the Government
increased the cumulative debt investment limits from US $3.2 billion to US $5 billion
and US $1.5 billion to US $3 billion for FII investments in Government Securities and
Corporate Debt, respectively.

CHAPTER 3
FIIs AND THE INDIAN
ECONOMY

30

IMPACT OF FIIS ON INDIAS STOCK MARKET

31

FII Net Flows (INR Crore)

200000
150000
100000
50000
0
-50000
-100000
FII Net Flows (INR Crore)

S & P BSE SENSEX

25000
20000
15000
10000
5000
0

S & P BSE SENSEX

8 Source: http://www.sebi.gov.in/

9 Source: http://www.sebi.gov.in/
32

Time
FII Net Flows (INR
S & P BSE
period
Crore)
SENSEX
1993
2595.1
3346.06
1994
6791.2
3926.9
1995
3853.8
3110.49
1996
10803.6
3085.2
1997
6207.3
3658.98
1998
-1479.9
3055.41
1999
6697.3
5005.82
2000
6510.9
3972.12
2001
12494.8
3262.33
2002
3677.9
3377.28
2003
35153.8
5838.96
2004
42049.1
6602.69
2005
41663.5
9397.93
2006
40589.2
13786.91
2007
80914.8
20286.99
2008
-41215.5
9647.31
2009
87987.6
17464.81
2010
179674.6
20509.09
2011
39352.8
15454.92
2012
163350.1
19426.71
2013
62288
21170.68
Value of Sensex and net flow of FII investments
Value of Correlation coefficient (r)
+0.786899

Coefficient of determination (r2)

0.619211

Correlation Analysis

33

Indian markets are primarily driven by FII fund flows.

The value of Correlation coefficient (r) is +0.786899. This value is positive which means
there is direct relationship between net FII inflow and sensexs year on year movement.
Further the magnitude of r is 0.79 which means there a strong relationship between the
variables. A movement in FII is accompanied by a strong movement of the index and in the
same direction.Over the years, higher FII inflows have helped SENSEX generate higher
returns.
The value of Coefficient of determination (r2) is 0.62. This means that if we take FII inflow
as the independent variable and value of Sensex as the dependent variable, then any change

in the value of Sensex is explained up to an extent of 62% due to some change in the net FII
investments.
A look at the charts shows that the markets peak when FII inflows are the highest and fall
when FIIs are missing in action.
Initially the FII investments were relatively low, but with time as SEBI has liberalized FII
regulations and increased the caps, FII net flows have gradually increased over the years.
In 2008, the BSE Sensex fell almost 50% due to the global financial meltdown. What hurt in
2008 was not the performance of companies but rapid outflow of $13 billion (Rs 55,000
crore) as investors fled risky assets.
In 2009, governments across the globe implemented plans to boost their economies. India,
helped by robust economic growth, became a preferred destination for investors. 85% was
the surge in the Sensex in 2009 with FIIs investing a net Rs 84,000 cr, crossing the 2007
level.
In 2010, the trend continued and FIIs pumped in $30 billion (Rs 1.3 lakh crore) into Indian
equities, helping the Sensex gain 25%.
In 2011, SENSEX fell by 11% due to fall in FII investment. High inflation, aggressive
tightening by RBI and escalation of corruption as an issue were some factors which made
them move to less risky assets.
In 2012, net inflows crossed Rs 1.2 lakh crore ($23 billion) which led to a gain of 25% in
SENSEX. Market experts believe the recent reforms initiatives undertaken by the
government to boost economic growth and investor sentiment have led to a renewed interest
among the foreign investors.
In 2013, foreign investors have made net inflows of a staggering amount of Rs 1.10 lakh
crore (nearly $20 billion) in stocks here during 2013, while taking their cumulative
investments in the country's equity market to a record level of close to $150 billion. The
expectation of a stable government that can move reforms process faster led the FIIs to bet on
Indian markets despite the US Federal Reserve deciding to taper its monthly bond- buying
program.

HOW DO FII FLOWS AFFECT VOLATILITY IN STOCK MARKET?

Volatility refers to the amount of uncertainty or risk about the size of changes in a security value.
The increased interest rate of FIIS in Indian equity market has been correlated frequently with
the volatility in the stock markets in India. Volatility is a standard measure of financial
vulnerability of an economy. Thus, volatility is an unattractive feature that has adverse
implications for decisions pertaining to investment in financial assets such as equity shares and
other stock market instruments. The persistence of volatility makes the investors risk averse.
Investors demand higher risk premium as a compensation for increased risk due to volatility. A
higher risk premium implies higher cost of capital and thus lowers investment.

34

The two charts show the share prices of two companies - LIC Housing Finance and Gujarat NRE
Coke plotted against the respective FII Holding in these stocks on a quarterly basis. A couple of
noteworthy things from these graphs are

When % holdings of FIIs increases in a stock its stocks price goes up and when it drops, its
share price comes down.
LIC Housing finance had a more or less steady contribution of FII as a percentage of total
shareholding till 2007. After a fall in 2008 it bounced back again to a significantly high level
by September 2010. However, in case of Gujarat NRE Coke, % of FIIs holdings has
fluctuated quite a lot during the same period.

During the crash in 2008 the FII holding in LIC Housing Finance decreased to close to 20%.
Some of the FIIs exited from LIC Housing Finance, but still its percentage in total shareholding
remained in mid 20s. This was the reason the stock price of LIC Housing Finance went down but
did not take a nose dive. Also, LIC housing Finance was able to perform remarkably even during
the downturn and has shown consistent growth in the last 5-6 years. Thus, the FIIs started
investing back and its percentage shareholding has increased to 41.07% by Sep 2010. This is an
example of FII holding in a growing company which has led to greater stock price appreciation
rather than adding to its volatility.
But, this was not the case with Gujarat NRE Coke. You could see from the chart that in 2007 FIIs
had a total holding of above 35% but it came down drastically to 17% by the end of 2008. The
performance of Gujarat NRE during 2005-10 has not been very impressive and also its high debt
situation is a cause of worry. This was the basic reason of a sudden exit of FIIs which led to a
drastic fall in its share price. Thus we can conclude that the FIIs invested in this company were

35

interested in quick gains. They added to the volatility of the stock which is not good for the retail
investors.

ROLE OF FOREIGN INSTITUTIONAL INVESTMENT IN INDIAN

ECONOMY
Like any other investors, FIIs are on the lookout for investment opportunities which could give
them better rates of return. With this being the prime focus, emerging markets like India, China,
Brazil etc. have caught their eye over the last few years. These countries have been growing at a
greater pace than other developed countries and subsequently offer better opportunities for the
FIIs. With one of the highest GDP growth rates over the last few years, India has also
experienced one of the highest Net FII inflows in the world. Other than the growth prospects
there are other important parameters like political environment, laws, liquidity of their
investment etc.
For example, in 2008 with the Sub Prime Crisis in US, fears of a worldwide economic crisis ran
amok. This coupled with a liquidity crunch or a preference to sit on cash led to a situation where
many FIIs booked profits and pulled out their money. As more and more money was pulled out,
it further depleted the investor confidence and the stock market tumbled to 8000 levels. Thus
FIIs tend to exit the stock markets prompted by profit booking or negative events like liquidity
concerns, fears of a crisis etc.
Thus, though FIIs are a welcome site for any stock market, but they also have the potential to
create chaos in the stock market
POSITIVE IMPACT
It has been emphasized 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 the FIIs. But FII flows can be considered both
as the cause and the effect of the stock market reforms. The market reforms were initiated
because of the presence of them and this in turn has led to increased flows.
1. ENHANCED FLOWS OF EQUITY CAPITAL
FIIs are well known for a greater appetite for equity than debt in their asset structure. For
example, pension funds in the United Kingdom and United States had 68 per cent and 64 per
cent, respectively, of their portfolios in equity in 1998. Not only it can help in supplementing the
domestic savings for the purpose of development projects 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.
2. MANAGEING UNCERTAINTY AND CONTROLLING 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 zero-coupon
bonds and index futures. FIIs not only enhance competition in financial markets, but also
36

improve the alignment of asset prices to fundamentals. FIIs in particular are known to have good
information and low transaction costs. By aligning asset prices closer to fundamentals, they
stabilize markets. In addition, a variety of FIIs with a variety of risk-return preferences also help
in dampening volatility.
3. 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.
4. IMPROVED CORPORATE GOVERNANCE
Good corporate governance is essential to overcome the principal-agent problem between shareholders and management. Information asymmetries and incomplete contracts between shareholders 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 free-ride 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.
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 this dependence has to a great extent caused a lot of
trouble for the Indian economy. Some of the factors are:
1.
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.
2.
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.
3.
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 countrys stock markets and thus have great
37

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.
4.
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.

Case Studies
Ajanta Pharma
1200
1000
800
600
400
200
0

Ajanta Pharma

Exponential (Ajanta Pharma)

Ajanta Pharma Limited rose 285% from Rs. 254.60 on 31 December 2012 to Rs. 985 on 3
December 2013, as FIIs increased stake from 1.34% to 2.27% during the same period.

10 Data taken from http://www.nseindia.com/

38

The India Cements Limited

100
90
80
70
60
50
40
30
20
10
0

The India Cements Limited

Linear (The India Cements Limited)

The stock had been under pressure due to the controversy related to Chennai Super Kings which
is promoted by the company which came into light in May 2013. The stock price fell by 35%
from Rs. 90.75 in December 2012 to Rs. 58.90 in December 2013 even though FIIs increased
their stake in the company from 29.34% to 35.59% during the same period.

FII TOP PICKS

Company

Market
(Rs Cr)
Finance 138895.2

Housing
Development
Corporation Ltd.
Shriram Transport Finance Company 16403.62
Ltd.
IDFC Ltd.
18545.01
Strides Arcolab Ltd.
2728.11
Jubilant Foodworks Ltd.
6697.36

Cap

FII (%)
75.91
54.68
51.38
49.56
47.3812

Housing Development Finance Corporation (HDFC): HDFC is the leader in housing finance
segment in country. It provides loans for purchasing residential houses, commercial real estate in
country. HDFC has a network of about 351 offices, providing services across 2400 town in India.
11 Source: http://www.nseindia.com/
12 Source: Dion Global
39

The company has market capitalization of Rs. 1,38,895crore. The company has the largest
Foreign
Institutional
Investors
stake
of
75.91%.
Shriram Transport Finance Company (STFCL): STFC is one of the leading vehicle finance
company in India. The company finances for various types of vehicle which includes, passenger
vehicle, commercial vehicle, multi utility vehicle, construction equipments etc. STFC has a
market cap of Rs 16403.62 crore. FIIs hold 54.68% stake in the company.
IDFC: IDFC is a infrastructure finance company in India. The company's business segments
includes corporate investment banking (project finance, fixed income, investment banking),
alternative asset management (private equity, real estate, infrastructure) and public market asset
management (mutual fund). The FIIs shareholding in the company stands at 51.38%. Market
capitalisation
of
the
company
is
Rs
18545.01
crore.
Strides Arcolab (SAL): SAL is a pharmaceutical company based in India. It has two
manufacturing plants, one in India and other in Italy. The company's core business is to develop
Intellectual Property (IP) led products. It markets its product to over 75 countries globally. The
pharma company comes at the fourth position in our list, having 49.56% FIIs stake in the
company.
Jubilant Foodworks (JFL): JFL, a Jubilant Bhartia group company, commenced its operations
in the year 1996. It is the largest and fastest food service company in India, having a market
share of 67% in the organised Pizza market. The company has a network of 679 Domino's Pizza
restaurant across the country. It has the franchise of two international brands viz., Domino's
Pizza and Dunkin' Donuts. The FIIs share accounts to 47.38% in the company.

REGISTERED FIIS IN INDIA

Year
January 2006
January 2007
January 2008
January 2009
January 2010
January 2011
January 2012
January 2013

40

Registered FIIs
833
1059
1279
1609
1697
1718
1767
1755

CHAPTER - 4
TRENDS AND ANALYSIS OF FII
INVESTMENTS IN INDIA

41

GROSS PURCHASES, SALES AND NET INVESTMENT TRENDS

In order to understand the nature, extent and causes of investment behaviors exhibited by FIIs in
the Indian economy its imperative to do a trend analysis of the funds that FIIs have poured in
over two decades of their entry into the market. The gates of Indian economy were opened for
FIIs in September, 1992. Since then the yearly net Investments have mostly been positive with an
exception of just two years i.e. 1998-99 and 2008-09. This positive trend in FII investment is an
encouraging fact since the same trend for other emerging economies has been a mix bag of
positives and negatives. Given below is the data of sales and purchases made by FIIs, over the
years, in the tabular form and its appropriate graphical representation.
Period
#

1992-93#
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15*

Gross Purchase (Rs. Crore)

5593
7631
9694
15554
18695
16115
56856
74051
49920
47060
144858
216951
346976
520506
948018
614576
846433
992596
921285
904845
1020459
634402

Gross
Crore)
-466
-2835
-2752
-6979
-12737
-17699
-46734
-64116
-41165
-44371
-99094
-171071
-305509
-489665
-881839
-660386
-703776
-846158
-827562
-736481
-966622
-518097

Sales

(Rs. Net Investment (Rs. Crore)

13
5127
4796
6942
8575
5958
-1584
10122
9935
8755
2689
45764
45880
41467
30841
66179
-45810
142657
146438
93723
168364
53837
116305

Data from September, 1992 to March, 1993

* Data from April, 2014 to August, 2014
(Source:http://www.cdslindia.com/publications/FIIDtlsFinYr.html,http://www.moneycontrol.com/india/stockmarket/foreigninstitutionalinvestors/
13/42/activity/FII/201404201408, SEBI handbook of statistics on Indian securities market.)

42

1500000
1000000
500000
Amount in crore rupees

0
-500000
-1000000
-1500000
Time period

Gross Purchase (Rs. Crore)

Gross Sales (Rs. Crore)

Graph showing the purchase and sales trend by FIIs over the years

Net Investment (Rs. Crore)

200000
150000
100000
50000
0
-50000
-100000
Net Investment (Rs. Crore)

Graph showing the net investment trend by FIIs over the years.

43

Comments
A look at the FII inflow table and supporting charts helps us to gauge the following points in
relation to the behaviour of FIIs over two decades after its arrival in India:
1. The quantum of funds in trade has soared by many folds. For example gross purchases by
FIIs in 2013-14 were 182 times of what it was in 1993-94. Similarly gross sales in 2013-14
were over 2000 times of what it was in 1993-94. Even net investments have been as high as
35 times in 2012-13 compared to that in 1994-94.
2. In the financial year 1998-99 the net investments by the FIIs were, for the first since
inception, negative. The reasons for this were multivariate. But the most important reason for
this negative inflow was the South East Asian crises. Also the execution of Pokhran nuclear
tests turned out to be a big negative as several countries imposed bans on lending to projects
in India. The net effect was that SENSEX touched its lowest point in recent past, the
currency started depreciating and major funds started reducing their equity exposure. As a
result FIIs also turned into net sellers.
3. The period following the year 2003-04 turned out to be a bumper period for FII investments
in the Indian economy. The major reasons were the policy changes and an improved
economic scenario over all. To start with, current account surpluses, higher remittances and
rising inflows on account of exports of software services had ensured the strengthening of the
Indian rupee. A stronger rupee implies better returns in dollar terms, encouraging foreign
investors looking for capital gains. This possibly even triggered a speculative surge in
inflows because of expectations that the rupee would rise even further. Returns on stock
market investment were also hiked through state policy. The then Finance Minister declared
in the Budget for 2003-04: In order to give a further fillip to the capital markets, it is now
proposed to exempt all listed equities that are acquired on or after March 1, 2003, and sold
after the lapse of a year, or more, from the incidence of capital gains tax. Long term capital
gains tax will, therefore, not hereafter apply to such transactions. This proposal should
facilitate investment in equities. Long term capital gains tax was being levied at the rate of
10 per cent up to that point of time. The surge was no doubt facilitated by this significant
concession. More reforms such increase in investment limits and easier registration for FIIs
ensured that this boom continued for years to follow.
4. Till end of 2007 FIIs have been the Net Buyers. But they became Net Sellers in 2008-09. In
January 2008, the US financial crisis came into light with sub-prime effect, which led to the
major financial companies to post heavy losses. In September 2008, this crisis worsened with
some of the companies had to file for bankruptcy and some had to take financial aids from
government to continue their business operations. This crisis had significant impact on FII
investment in India, as investors all over the world lacked confidence on the market. The
crisis in confidence resulted in the selling of equities of Rs. 47,706.3 crore in April 2008March 2009 by. This had significant impact on Indias stock market. When FIIs started
withdrawing money from the financial market, the domestic investors became fearful and
they also withdrew money from the market. Thus, the Sensex which touched above 21,000
mark in January 2008, had plunged below the 8160 mark in March 2009. After a long spell of
growth, the Indian economy experienced a downturn. Industrial growth was faltering,
44

inflation remained at double-digit levels, the current account deficit widened, foreign
exchange reserves depleted, the rupee got depreciated, and the Sensex had crashed.
5. After their flight last year, foreign institutional investors flocked back to bet on the Indias
growth story by pouring in a record over Rs. 90,292.4 crores in domestic equities and Rs.
32,437 crores in debt securities in the financial year 2009-10. The late revival of monsoon,
upward revision of economic growth from 5.8 per cent to 6.1 per cent, better-than-expected
performance of companies in the quarter ending June 30, 2009, leading to savings in the tax
payers money, the trade policy with an ambitious target of US$ 200 billion exports for 201011 had all revived the confidence of FIIs investors in India. India, which is the second fastest
growing economy after China, had lately been a major recipient of foreign institutional
investor (FII) funds driven by the strong fundamentals and growth opportunities [1]. (Banaji,
1998)
6. The financial year was major disappointment as far as FIIs are concerned. The year saw the
net investment dipping to almost a third of what it was in the previous year. The major fears
were onset after the tapering policy announced by Federal Reserve Bank. India was identified
as a fragile nation in context of tapering because its capital markets were heavily reliant on
foreign capital, the macroeconomic indicators were not positive, foreign reserves were
depleting and currency was depreciating. As a result FII started pulling the plug.

INVESTMENT TRENDS IN THE EQUITY AND DEBT SEGMENTS OF

THE MARKET
At the commencement of FII regime, such funds were allowed to invest either 100% in equity only
or in equity and debt in the ratio of 70:30. Such a limit proved to be restrictive on the creation of a
true debt market. All of this was up for change in the year 1996. Like in other countries, the
restrictions on FI investments began to be progressively liberalized. From November 1996, any
registered FII willing to make 100 per cent investment in debt securities were permitted to do so
subject to specific approval from SEBI as a separate category of FIIs or sub-accounts as 100 per cent
debt funds. But the Foreign Institutional Investments made their debut in debt from March 1997
onwards. The result of all this exercise was the creation of a debt market that was set to become an
integral component of FII investments in coming years. The following table and graph provide
comparative data about debt and equity investments by FIIs over the years.

45

Period

Equity
Crore)

1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02

13
5127
4796
6942
8546
5267
-717
9670
10207
8072

(Rs.

Debt (Rs. Crore)

Total Investment (Rs. Crore)

0
0
0
0
29
691
-867
453
-273
690

13
5127
4796
6942
8575
5958
-1584
10123
9934
8762

2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15*

2527
39960
44123
48801
25236
53404
-47706
110221
110121
43738
140033
79709
53,566

162
5805
1759
-7334
5605
122775
1895
32438
36317
49988
28334
-28060
62,738

2689
45765
45882
41467
30841
176179
-45811
142659
146438
93726
168367
51649
116304

# Data from September, 1992 to March, 1993

* Data from April, 2014 to August, 2014
(Source:http://www.cdslindia.com/publications/FIIDtlsFinYr.html,http://www.moneycontrol.com/india/stockmarket/foreigninstitutionalinvestors/
13/42/activity/FII/201404201408, SEBI handbook of statistics on Indian securities market.)

Trends in investments in Equity and Debt by FIIs

200000

150000

100000

50000

-50000

-100000
Equity (Rs. Crore)

46

Debt (Rs. Crore)

The 100% debt market for FII had emerged in 1996 but it had largely remained under the shadow
of equity market for over a decade. Meanwhile the government had been trying to make debt
market more attractive by taking several steps. This includes allowing FIIs to invest in dated
Government securities (April 1998), increasing of limits on investment in dated government
securities (2004), simplification of registration procedures among others. All these efforts yielded
results only in 2007-08 when for the first time net investment in debt segment was more than that
in equity. Surprisingly enough, debt segment stayed positive even in the year 2008-09 when the
world was going through financial crisis and net sales in equity segment was to the tune of
45,811 crore rupees. On the basis of this it was assumed that investment in debt segment would
be higher in the ensuing year and would help to stabilise Indian economy. Expectations came
true albeit the fact that investment in equity segment had been tremendously high in 2009-10.
The inflow pattern of 2010-11 had been similar to that of previous year. In the next year equity
investment fell by a great quantum while debt investment rose. As a result debt investment was
higher than equity invest only for the second time ever since. The following two years were
decelerating from debt point of view. The figure stood at a negative 28,060 for 2013-14 on back
of tapering fear and weak economic outlook. However the segment has turned bullish again with
investment of about 62,738 crore rupees in 2014 till august, a total of 9,000 crore more than that
in equity.

INVESTMENTS TRENDS IN DIFFERENT SECTORS OF ECONOMY

Sectors
Automobiles & Auto
Components
Total Financial
Services
Banks
Other Financial
Services1
Capital Goods
Chemicals &
Petrochemicals
Coal
Commercial Services
& Supplies
Construction Materials
Consumer Durables
Diversified2
Diversified Consumer
Services
Food, Beverages &
Tobacco
47

Net Investment
July 1-15, 2014
IN INR Cr.
Equity
Debt
Total

Assets Under Control (AUC) as

on July 15, 2014
IN INR Cr.
Equity
Debt
Total

209

209

93,784

93,784

485
235

2,084
0

2,569
235

4,59,247
2,75,925

40,133
89

4,99,380
2,76,014

249
-218

2,084
0

2,333
-218

1,83,322
1,13,504

40,044
51

2,23,366
1,13,555

55
-235

0
0

55
-235

16,376
12,910

0
0

16,376
12,910

29

29

12,833

12,833

-177
-6
-21

0
0
0

-177
-6
-21

36,316
5,932
3,559

370
0
0

36,686
5,932
3,559

263

263

-3,665

-3,665

83,201

83,201

Forest Materials
General Industrials

46
-52

0
0

46
-52

690
10,954

0
0

690
10,954

-4

-4

87

87

-9
24

0
0

-9
24

229
6,288

0
125

229
6,413

21

21

6,833

6,833

194
316
-18
655

0
-13
237
0

194
303
219
655

47,660
23,952
57,627
1,10,310

0
839
624
2,209

47,660
24,792
58,251
1,12,519

899
-148
58
133
40

0
0
0
0
0

899
-148
58
133
40

1,10,160
20,142
4,307
2,36,618
42,507

25
250
0
0
460

1,10,185
20,392
4,307
2,36,618
42,967

163

163

213
243
6
37

0
0
0
0

213
243
6
37

22,424
25,232
101
1,850

0
0
0
0

22,424
25,232
101
1,850

195
21
-3

0
0
0

195
21
-3

12,559
2,530
1,467

0
0
0

12,559
2,530
1,467

24

24

-13
635

0
15

-13
650

6,701
71,359

6,701
72,466

Sovereign
Others4

0
8,554

3,715
4,382

3,715
12,935

Grand Total

8,259

10,420

18,678

0
68,536
17,04,00
7

0
1,107
1,08,93
8
47,844
2,02,97
4

Hardware Technology
& Equipment
Healthcare Equipment
& Supplies
Healthcare Services
Hotels, Restaurants &
Tourism
Household & Personal
Products
Media
Metals & Mining
Oil & Gas
Pharmaceuticals &
Biotechnology
Realty
Retailing
Software & Services
Telecom Services
Telecommunications
Equipment
Textiles, Apparels &
Accessories
Transportation
Airlines
Logistics
Marine Port &
Services
Roads & Highways
Shipping
Surface
Transportation
Transport Related
Services
Utilities3

48

1,08,938
1,16,380
19,06,981

"Other Financial Services" includes Financial Sector other than "Bank". Sub-category underOther Financial
Services" are as follows: - Financial Institutions, Holding Companies, - Housing Finance Companies, Investment
Companies, Other Finance companies (including NBFCs)
2

AS per BSE Classification Companies under "Diversified" are as follows:

Mercator Limited, Kutch Salt & Allied Industries Ltd., SVARTCORP, Advanced Micronic Devices Ltd., VBC Industries
Ltd,, Cosco (India) ltd., DCM Shriram Consolidated Ltd., Cimmco Ltd, Gillanders Arbuthnot & Co. Ltd., ADITYA BIRLA
NUVO LTD., KESORAM IND, Empire Industries Ltd., BALMER LAWRI, 3M INDIA LTD
3

Sub-category under "Utilities" are as follows:

Electric Utilities, Other Utilities (Including Pipelines).

49

Assets Under
Control
of FIIs
Total Financial
S ervices (AUC)
Banks
as on July 15, 2014

Automobiles & Auto Components

Other Financial S ervices

Capital Goods

Chemicals & Petrochemicals

Coal

Commercial S ervices & S upplies

Cons truction Materials

Cons umer Durables

Divers ified

Divers ified Cons umer S ervices

Food, Beverages & Tobacco

Fores t Materials

General Indus trials

Hardware Technology & Equipment

Healthcare Equipment & S upplies

Healthcare S ervices

Hotels , Res taurants & Touris m

Hous ehold & Pers onal Products

Media

Metals & Mining

Oil & Gas

Pharmaceuticals & Biotechnology

Realty

Retailing

S oftware & S ervices

Telecom S ervices

Telecommunications Equipment

Textiles , Apparels & Acces s ories

Trans portation

Airlines

Logis tics

Marine Port & S ervices

Roads & Highways

S hipping

S urface Trans portation

Trans port Related S ervices

Utilities

S overeign

Others

50

FII INFLOWS IN INDIA CURRENT SCENARIO ANALYSIS

The first half of 2014 has been prosperous for the Indian economy as whole. But the FIIs have
been resoundingly bullish on the capital markets of the country. As a testimony the FIIs have
made an investment of more than 1,20,00crore rupees in the period of January to June in 2014.
There has been a substantial influx of funds in both the equity and debt segments in the period.
This major inflow of foreign funds has been against the wind as in 2013 it was predicted that the
tapering by Federal Reserve bank would have an adverse impact on investor sentiments all over
but particularly in fragile five economies which included India. India was identified as a fragile
nation in context of tapering because its capital markets were heavily reliant on foreign capital,
the macroeconomic indicators were not positive, foreign reserves were depleting and currency
was depreciating. While the problems seemed aplenty a year back, the increase in inflow this
year seem to be a different story. A major chunk of the inflow has occurred in the march to June
portion of the period. The major reasons for this amplified inflow of FII are as follows:

Positive economic indicators

The positive macroeconomic indicators turned out to be a major boost for the economy.
With a current account deficit of $ 45 billion, fiscal deficit at 4.6 % of GDP, and
estimated GDP growth rate of 5.2% Indian economy seemed to be in much better shape
than before. This provided a reason good enough to attract FIIs.

Easy money policies

The central banks of major economies of the world have been trying to infuse liquidity in
their countries. The central banks of the US, the UK, Japan, etc. have adopted a policy of
making capital available at near-zero interest rates since 2008. The easy money policies
adopted by these banks have provided a tailwind to FII flows.

Relatively better position for India

India has attracted flows on account of its relative attractiveness among emerging
markets, many of which such as China and Russia have been facing their own issues.
While China has been facing an economic slowdown, Russian stocks have been affected
by geopolitical issues, including a conflict in Ukraine. The Russian currency, the rouble,
has fallen to an all-time.

Appreciation in the value of rupees.

The Indian currency had depreciated to its all-time low value in 2013 on the back of
information flowing from various sources. This year, however the currency has regained
a bit. This appreciation in the value of rupee adds to the returns of FIIs and hence
provides an additional incentive.
Expectations from political environment
The general elections provided an opportunity to speculate on the possibility of a stable
government at the centre. A stable and decision making political regime is a positive
factor in decision making process of FIIs. With general elections around such

51

expectations increased. The inflows have remained accelerated even post the election
results reinforcing such expectations.

FPI - DAWN OF A NEW REGIME

With an aim to attract foreign investment in India, simplify compliance requirements and have
uniform guidelines for various categories of foreign investors like Foreign Institutional Investors
(FIIs) and Qualified Foreign Investors (QFIs), SEBI had notified in January 2014 the SEBI
(Foreign Portfolio Investors) Regulations, 2013 (FPIs Regulations). FPIs Regulations have been
framed by SEBI keeping in view the provisions of SEBI (Foreign Institutional Investors)
Regulations, 1995, QFIs framework and the recommendations of the Committee on
Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments which
was formed under the Chairmanship of Mr. K. M. Chandrasekhar. Although the regulations were
notified in January its implementation got delayed due to certain regulatory and taxation hurdles.
The new foreign portfolio investor (FPI) regulations, which replaced the two-decade old foreign
institutional investors (FII) regime, in the Indian market got operational from 2 nd June 2014.
.Existing FIIs and sub-accounts that are due for renewal will have to register under new FPI
regime. On the other hand, existing QFIs will have to register within a year.
Salient Features of the SEBI (Foreign Portfolio Investors) Regulations, 2013 are as under:
Foreign Portfolio Investors
In order to provide for uniform entry norms for foreign portfolio investors in India, existing FIIs,
Sub Accounts and QFIs shall be merged into a new investor class termed as Foreign Portfolio
Investors (FPIs). FPIs will be required to seek registration with Designated Depository
Participants (DDPs) authorized by SEBI. DDPs will be empowered to register FPIs on behalf of
SEBI. The applicant FPIs need to meet risk based Know Your Client (KYC) requirements and
obtain registration in any one of the following categories based on their risk based KYC
Classification of FPIs into 3 categories:
Category - I this would include Government and Government related entities such as
Foreign Central Banks, Sovereign Wealth Funds, Multilateral Organizations / Agencies.
Category - II - this would include appropriately regulated broad based funds such as
Mutual Funds, Investment Trusts, Insurance / Reinsurance Companies, other broad based
funds; appropriately regulated entities such as Banks, Asset Management Companies,
Investment Managers / Advisors, Portfolio Managers; University Funds, Pension Funds
and University related Endowments already registered with SEBI as FII/Sub Account.
Category - III All other foreign investors investing in India under Portfolio Investment
Scheme (PIS) route (not included in above 2 categories) such as Endowments, Charitable
Societies / Trust, Foundations, Corporate Bodies, Trusts, Individuals, Family Offices, etc.
The registration granted to FPIs by the DDPs on behalf of SEBI shall be permanent unless
suspended or cancelled by SEBI. All existing FIIs and Sub Accounts may continue to buy, sell or
otherwise deal in securities under the FPI regime.
52

Investment avenues
FPIs shall be allowed to invest in all those securities, wherein FIIs are allowed to invest.
Category I and Category II FPIs shall be allowed to issue, or otherwise deal in Offshore
Derivative Instruments (ODIs), directly or indirectly. Such ODIs can be issued only to persons
who are regulated by an appropriate foreign regulatory authority after ensuring compliance with
KYC norms.
Designated Depository Participants
DDP shall be an Authorized Dealer Category-1 bank authorized by Reserve Bank of India (RBI),
Depository Participant (DP) and Custodian of Securities registered with SEBI. Depository shall
forward the application of DDP along with its recommendation to SEBI for grant of approval.
SEBI registered Custodian of Securities shall be deemed to be DDP subject to conditions. SEBI
approved Qualified Depository Participant not meeting the DDP eligibility criteria may operate
as DDP for a period of 1 year. DDPs shall carry out necessary due diligence and obtain
appropriate declarations and undertakings before registering FPIs.
Anticipated Advantages

53

Single window clearance

FPI regulations provide a single window clearance to all the foreign participants. Earlier
the Sub accounts had to be registered as FII to invest in Indian capital market. Now all
participants can get a direct registration through DDPs.
Risk based KYC
Under FII regime all the participants had to undergo the same stringent KYC norms
before they could invest hence delaying the investment process. Under the new regime
KYC norms are applicable on the basis of the category the fund belongs to. As such less
documentation is required for systematically important funds.
Uniform tax rate
The rates of tax applicable on QFIs were higher than those on FIIs in the previous
regime. A uniform tax regime provides a better incentive.

CHAPTER 5
RESEARCH WORK

54

RESEARCH METHODOLOGY
For the purpose of conducting this study the value of Sensex is taken as on the last working day
of respective years. The quantum of FII investment is taken in the context of a calendar year. The
source of information for above data is official website of Bombay stock exchange. These two
datas have been used as variables for further calculation.
Tool Used For Data Analysis
Karl Pearsons coefficient of correlation has been used as the data sets are real and it gives an
informative and accurate statement of the strength of the linear association between the two
variables. Here, our variables are BSE SENSEX and FII Investments.
Coefficient of determination has been used to determine quantum of change BSE SENSEX the
attributable to FII investment.
Value of Sensex and net flow of FII investments
Time
FII Net Flows (INR
S & P BSE
period
Crore)
SENSEX
1993
2595.1
3346.06
Correlation
analysis
1994
6791.2
3926.9
2
Coefficient
Value of Correlation
(r)
1995 coefficient
3853.8
3110.49of determination (r )
+0.786899
1996
10803.6
3085.2 0.619211
1997
6207.3
3658.98
1998
-1479.9
3055.41
1999
6697.3
5005.82
2000
6510.9
3972.12
2001
12494.8
3262.33
2002
3677.9
3377.28
2003
35153.8
5838.96
2004
42049.1
6602.69
2005
41663.5
9397.93
2006
40589.2
13786.91
2007
80914.8
20286.99
2008
-41215.5
9647.31
2009
87987.6
17464.81
2010
179674.6
20509.09
2011
39352.8
15454.92
2012
163350.1
19426.71
2013
62288
21170.68

INTERPRETATION OF THE RESULT

55

The value of Correlation coefficient (r) is +0.786899. This value is positive which means there
is direct relationship between net FII inflow and sensexs year on year movement. Further the
magnitude of r is 0.79 which means there a strong relationship between the variables. A
movement in FII is accompanied by a strong movement of the index and in the same direction.
The value of Coefficient of determination (r2) is 0.62. This means that if we take FII inflow as
the independent variable and value of Sensex as the dependent variable, then any change in the
value of Sensex is explained up to an extent of 62% due to some change in the net FII
investments.

56

LIMITATIONS OF THE STUDY

1. Sensex is a volatile index. Its value is subject to change as a transaction takes place. So
taking the values of any particular day is less representative of movement of index in a
year.
2. The sample space is small. The research has taken only one value for a year. The
accuracy of coefficient of correlation can be improved by taking monthly data. Still better
if daily values are to be compared.
3. Shortage of space and time to conduct such an in depth analysis.

57

CONCLUSION
FIIs have been investing in the Indian capital market for over 2 decades now.In the due course of
time, foreign capital has become increasingly significant source of finance. Hence there has been
growing presence of FIIs in Indian stock market evidenced by the manifold increase in their
investments. In developing countries like India, foreign capital helps in escalating
theproductivity of labor and to build up foreign exchange reserves to meet the current account
deficit. On the flip side, foreign capital is free and unpredictable and is always on the lookout of
profit, the reason being, the portfolio managers of these FIIs are always on their toes for booking
profits for their dynamic portfolios across countries
On the evaluation of their investment trends and the movement of Sensex we have found that
there is a strong positive relation between the two. It can be stated that while high inflows of FIIs
has helped the Sensex scale new heights in certain years, the years marked by their absence have
caused the Sensex to take a plunge.

58

APPENDIX

59

BIBLIOGRAPHY
WEBSITES AND WEBLINKS
1. http://www.investindia.gov.in/
2. http://www.sebi.gov.in/sebiweb/
3. http://www.moneycontrol.com/
4. http://www.nseindia.com/
5. http://articles.economictimes.indiatimes.com/
6. http://businesstoday.intoday.in/
7. http://www.thehindu.com/business
8. (http://blogs.reuters.com
9. http://www.business-standard.com
10. http://shodhganga.inflibnet.ac.in
11. http://timesofindia.indiatimes.com
12. http://indiainbusiness.nic.in
13. http://indianresearchjournals.com
14. http://www.scribd.com

JOURNAL AND PUBLICATIONS

FII operations in Indian capital market and testing of hypothesis

Handbook of Statistics on Indian Securities Market 2013
Handbook of Statistics on the Indian Securities Market 2004
Foreign Institutional Investors in India - An Overview
FII Regulatory flyer
Foreign capital flow and Indian capital market: an appraisal-Pooja Singh
(VSRD International Journal of Business and Management Research, Vol. III Issue XI November 2013)

Do FIIs impact volatility of Indian stock market? - Jatinder loomba*

(International Journal of Marketing, Financial Services & Management Research Vol.1 Issue 7, July 2012, ISSN 2277 3622)

60