FOREIGN DIRECT INVESTMENT

&
FOREIGN INSTITUTIONAL INVESTOR
 PRESENTERS
NAMES ROLL NO
MAMATA ADAGATLA 01
NIDHI BHOIR 05
AABHASI CHACHIRE 10
KARISHMA GAIKWAD 20
SHIVANJANI PUJARI 43
ABHISHEK GUJJUL 54
 Types Of FDI IN INDIA

Direction Target Motive

Inward Resource
Greenfield seeking
FDI Investments

Outward Market
Mergers & seeking
FDI
Acquisitions

Efficiency
seeking
Horizontal FDI

Strategic
asset
Vertical FDI seeking
BY DIRECTION
• INWARD FDI : An inward investment involves an foreign entity either
investing in or purchasing the goods of a local company.

• OUTWARD FDI : An outward investment is a business strategy where a

domestic firm expands its operations to a foreign country either via acquisition
or expansion of an existing foreign facility.
BY TARGET
• HORIZONTAL FDI : Where the company carries out the same activities abroad as at
home (for example Toyota assembling cars in both japan and UK )

• VERTICAL FDI : When different storage of activities are added abroad .Where the FDI
takes the firm nearer to the market is called Forward vertical FDI.(for example Toyota
acquiring a car distributorship in America) Where international integration moves back
towards raw materials is called Backward vertical FDI.(for example Toyota acquiring a tyre
manufacturers)

• GREENFIELD INVESTMENT : Greenfield investment is the investment in a

manufacturing ,office, etc. It is the idea of building a facility on a green field such as
farmland or a forest.

• MERGERS AND ACQUISITIONS : A merger is a combination of two companies to form

a new company, while an acquisition is the purchase of one company by another company
in which a new company is formed.
BY MOTIVE :
• RESOURCE SEEKING : looking for resources at a lower real cost.

• MARKET SEEKING : secure market share and sales growth in target foreign
market.

• EFFICIENCY SEEKING : seeks to establish efficient structure through useful

factors ,cultures, policies or markets.

• STRATEGIC ASSET SEEKING : seeks to acquire assets in foreign farms that

promote corporate long term objectives.
ANALYSIS OF FDI FROM 2013-18
FDI in the Year 2016-2017
• Foreign direct investment inflows hit an all-time high of $60.1 billion
in 2016-17, Mauritius being the topmost contributor.
• The FDI inflows were even higher at $60.08 billion
• FDI rules were radically overhauled across sectors such as
broadcasting, retail trading and air transport. The Modi government
amended legislation to hike the foreign investment cap to 49% in
insurance and pension from the earlier 26%.
• Initiatives such as introduction of composite caps in the FDI policy and
raising the FIPB approval limit were also undertaken to promote ease
of doing business in the country.
FDI in the Year 2017- 2018
• The foreign direct investment in India decreased to USD 40 billion in
2017 from USD 44 billion in 2016 fiscal
• The low growth of FDI in the consumer and retail sectors can be
mainly attributed to uncertainty and complexity of the FDI policy
• The data showed that the FDI equity inflow of USD 44.8 billion in
2017-18 is the highest ever for any financial year
• Decline in foreign inflows could put pressure on the country's balance
of payments and may also impact the value of the rupee 
 DIFFERENCE BETWEEN FDI AND FII
BASIS FOR COMPARISON FDI
Meaning When a company situated in one
country makes an investment in a
company situated abroad, it is known
as FDI.
FII
FII is when foreign companies make
investments in the stock market of a
country.

Entry and Exit Difficult Easy

What it brings? Long term capital Long/Short term capital

Transfer of Funds, resources, technology, Funds only.

strategies, know-how etc.

Economic Growth Yes No

Consequences Increase in country's Gross Domestic Increase in capital of the country.

Product (GDP).

Target Specific Company No such target, investment flows into

the financial market.
Control over a company Yes No
 Key Differences Between FDI and FII

Foreign Direct Investment or FDI is defined as the investment made by a company in the
company situated outside the country. Foreign Institutional Investor or FII is when investors,
most commonly in the form of institutions that invest in the country’s financial market.

FII is a way to make quick money, the entry and exit to the stock market are very easy. On the
other hand, the entry and exit are not easy in FDI.

FDI brings long-term capital in the investee company whereas FII may bring long or short
term capital in the country.

In the case of FDI, there is the transfer of funds, resources, technology, strategies, know-how.
Conversely, FII involves the transfer of funds only.
Government Initiatives
• In September 2017, the Government of India asked the states to focus on strengthening single
window clearance system for fast-tracking approval processes, in order to increase Japanese
investments in India.

• The Ministry of Commerce and Industry, Government of India has eased the approval mechanism
for foreign direct investment (FDI) proposals by doing away with the approval of Department of
Revenue and mandating clearance of all proposals requiring approval within 10 weeks after the
receipt of application.

• The Government of India is in talks with stakeholders to further ease foreign direct investment (FDI)
in defence under the automatic route to 51 per cent from the current 49 per cent, in order to give a
boost to the Make in India initiative and to generate employment.

• In January 2018, Government of India allowed 100 per cent FDI in single brand retail through
automatic route.
FDI increases job opportunities, infrastructural development in
the investee country and thus leads to economic growth, which is
not in the case of FII.

FDI results in the increase in the country’s productivity. As

opposed to FII that results in the increase in the country’s capital.

FDI targets a particular company, but FII does not target a

particular company.

FDI obtains management control in the company. However, FII

does not enable such control.
 In January 2018, Government of India allowed foreign airlines to invest in Air India up to 49 per cent
with government approval. The investment cannot exceed 49 per cent directly or indirectly.
In September 2018, the Government of India released the National Digital Communications Policy, 2018
which envisages increasing FDI inflows in the telecommunications sector to US$ 100 billion by 2022.
In December 2018, the Government of India revised FDI rules related to e-commerce. As per the rules
100 per cent FDI is allowed in the marketplace based model of e-commerce. Also, sales of any vendor
through an e-commerce marketplace entity or its group companies have been limited to 25 per cent of
the total sales of such vendor.
As of February 2019, the Government of India is working on a road map to achieve its goal of US$ 100
billion worth of FDI inflows.
 In February 2019, the Government of India released the Draft National e-Commerce Policy which
encourages FDI in the marketplace model of e-commerce. Further, it states that the FDI policy for e-
commerce sector has been developed to ensure a level playing field for all participants..
 Government of India is planning to consider 100 per cent FDI in Insurance intermediaries in India to
give a boost to the sector and attracting more
 Foreign institutional investor (FII)
A foreign institutional investor (FII) is an investor or investment
fund registered in a country outside of the one in which it is
investing. Institutional investors most notably include hedge funds,
insurance companies, pension funds and mutual funds. The term is
used most commonly in India and refers to outside companies
investing in the financial markets of India.

Countries with the highest volume of foreign institutional

investments are those that have developing economies. These types
of economies provide investors with higher growth potential than in
mature economies. This is why these investors are most commonly
found in India, all of which must register with the Securities and
Exchange Board of India to participate in the market.
 HOW FII STARTED IN INDIA

India opened its stock market to foreign investors in

September 1992
Since 1993, received portfolio investment from
foreigners in the form of foreign institutional
investment in equities.
This has become one of the main channels of FII in
India for foreigners.
In order to trade in Indian equity market foreign
corporations need to register with SEBI as Foreign
Institutional Investor (FII).
PROCEDURE FOR ENTRY IN FII
Who can be registered as an
FII?
• One who propose to invest their proprietary funds or on behalf of
"broad based" funds or of foreign corporates and individuals and
belong to any of the under given categories can be registered for FII.
• Pension Funds
• Mutual Funds
• Investment Trust
• Insurance or reinsurance companies
• Bank
How to Apply?
• An application for registration has to be made in form A, the format of
which is provided in the SEBI(FII) regulations, 1995 and submitted
with under mentioned documents in duplicate addressed to SEBI as
well as to reserve bank of India (RBI) and sent to the following
address within 10 to 12 days of receipt of application.

• Address for application

The division chief FII division securities and exchange board of India,
224, Mittal court, 'B' wing, 1st floor, Nariman point,
Mumbai - 400 021, India.
Eligibility Criteria for Applicant
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.
• Applicant must be legally permitted to invest in securities outside the
country or its in-corporation / establishment.
• The applicant must be a "fit and proper" person.
• The applicant has to appoint a local custodian
• Payment of registration fee of US $ 5,000.00
REGISTRATION PROCESS
 WHERE CAN FII INVEST?
Current financial instruments are available for FII investments
• Securities in primary and secondary markets including shares,
debentures and warrants of companies, unlisted, listed or to be listed
on a recognized stock exchange in India
• Units of mutual funds
• Dated Government Securities
• Derivatives traded on a recognized stock exchange
• Commercial papers
 RESTRICTIONS
• FIIs can buy/sell securities on Indian stock exchanges, but they have to get
registered with stock market regulator SEBI.
• They can also invest in listed and unlisted securities outside stock exchanges
if the price at which stake is sold has been approved by RBI.
• No individual FII/sub-account can acquire more than 10% of the paid up
capital of an Indian company.
• In addition, the government also introduces new regulations from time to
time to ensure that FII investments are in order. For example, investment
through participatory notes (PNs) was curbed by SEBI recently.
• The opening of the Indian stock market to Foreign Institutional Investors (FII)
in 1992 made way for substantial foreign funds. Since then, the number of
FIIs has been increasing to 740 currently.
 POLICIES AND REGULATIONS
REGARDING FII
• The regulations for foreign investment in India have been framed by
the Reserve Bank of India in terms of Sections 6 and 47 of
the Foreign Exchange Management Act, 1999 and notified vide
Notification No. FEMA 20/ 2000-RB dated 3rd May 2000 viz. 
• Foreign Exchange Management (Transfer or issue of Security by a perso
n Resident outside India) Regulations 2000
, as amended from time to time.
• In line with the said regulations, since 2003, the Securities and
Exchange Board of India (SEBI) has been registering FIIs
and monitoring investments made by them through the
portfolio investment route under the SEBI (FII) regulations 1995. SEBI
acts as the nodal point in the registration of FIIs.
• Subsequent to SEBI (FPI) Regulations, 2014 depositories register and
monitor the activities of the FIIs and SEBI continues to be the regulator.
Advantages
• Enhanced flows of equity capital
• FIIs have a greater appetite for equity than debt in their
asset structure.
• Managing uncertainty and controlling risks.
• FII inflows help in financial innovation and development
of hedging instruments.
• Improving capital markets
• Enhance competition and efficiency of financial
markets.
• FIIs can help in the process of economic development
Disadvantages
• Problems of Inflation
• Problems for small investor
• Adverse impact on Exports
• Hot Money
 Current trends in market
• India has turned out to be the most consistent
investment destination across all markets for foreign
investors. 
• Foreign investors have pumped in a net sum of Rs
11,096 crore into the Indian capital markets in April,
driven by global and domestic factors.
• On the NSE, FIIs have invested Rs 49,731 crore in
equities in the calendar year through April 15.
• ( Against this, mutual fund investments have lagged at
just Rs 309 crore, according to HDFC Securities.) 
 Recent Developments/Investments
• In February 2019, net inflows from foreign portfolio
investors (FPI) in India reached a 15-month high of Rs
17,220 crore (US$ 2.49 billion).
• In March 2019, initial public offer (IPO) of India’s first
real estate investment trust (REIT) was subscribed 2.6
times.
• Morgan Stanley expects the BSE Sensex to reach 42,000
by December 2019 end.
• In September 2018, Embassy Office Parks filed the
papers for India’s first Real Estate Investment Trusts
(REIT).