My this article talks about the foreign institutional investors which are taking a large share of market in the current market scenario. Maximum number of readers do not know the meaning of the term Foreign Institutional Investor. The term means the entities or companies or any institution which are registered outside India and they want to make investments in India or make proposals for making investments in India. They make proposals not individually but in the name of sub accounts which can be known as Participatory Notes. These participatory notes are also known as Offshore Derivatives.
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Foreign Institutional Investors
A survey was recently carried out by Bank of America, in which the number of FII participants was 50, and the majority of them said that the best market for FII is India. The statistics also said the same. The equity market for the global investors in India stand at 43% which is the highest among the largest countries, of which China had only 26%. In India in the year 2014-15, the Total investment by FII was around 43.5 Billion Dollars, out of which 26.3 Billion Dollars was invested in the Debt securities and the around 17.2 Billion Dollars was invested in Equity market of India.
The History of foreign institutional investors in India started from the year 1992, process was started for starting it. Later in the year 1993, Indian company started the concept of allocating the securities in the name of foreign investors in the equities.
The ceiling limit for the investment in Indian market is limited to 24% of the paid up capital of any Indian company. However, the same limit is for public sector banks, which is 20%. However the limit of 24% can be raised to the extent of sectoral cap of the particular company if the same is guaranteed with the special resolution by the board in that particular company
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Why it is required??
The most relevant answer to the above question is that it shows the high confidence and the high sentiments of the investors are showed. FII has been every country’s economic growth and prosperity. Any country can also have soft skills and technology upgradation from other countries by way of foreign investment. But nowadays, the FII have become very smart, and they have become investors on a day-to-day basis, which means they daily purchase shares of a particular company and sell the same shares on the same day. So there is no foreign investment actually and the country as a whole is not benefited for the same.
They have become the best speculators of the same. The positive sides of having the foreign institutional investors in India are relations will increase between shareholders and management, controlling the risks, will boost the flow of equity capital in the country. The negative sides of the same are inflation will increase in the market as they will be using their foreign currencies which will decrease the value of own country, exports will become uncompetitive.
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Who can be registered as FIIs??
There has been long list for the ones who are registered as FII, but some of them are charitable trusts, banks, mutual funds, banks, insurance companies, university funds, foundations,
pension funds, wealth funds, etc. This is the exhaustive list. Many more can be listed as FII.
There has been various exemptions provided to the foreign institutional investors such as some of the RBI exemptions, taxation reliefs are also given such as India has made many agreements such as Double Taxation avoidance agreements with various countries, so the FIIs of such countries are exempt from the capital gains tax.
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