Foreign Investment

Company or individual invest in other country

In order to get cheaper factors of production
To get additional customers
To get tax benefits
To make global image
To technical know how

What are Foreign Investors looking

for?
Good projects
Demand Potential
Revenue Potential
Stable Policy Environment/Political Commitment
Optimal Risk Allocation Framework

Factors affecting foreign

investment
Rate

of interest

Profitability
Costs

of production

Economic

conditions

Government
Political

policies

stability

Market Size

Forms of Foreign Investment

FDI ( Foreign Direct Investment)

FII (Foreign Institutional Investment)

Foreign Direct Investment (FDI)

Foreign direct investment (FDI): a firm invests
directly in foreign facilities
It does not include foreign investment into the
stock markets.
A firm that engages in FDI becomes a
multinational enterprise (MNE)
Multinational = more than one country

Advantages of FDI
Access

to markets

Access

to resources

Reduces

cost of production

Increase

in employment opportunities

Increase

in government revenue

Disadvantages of FDI
Destruction

of small entrepreneurs

No

real benefit to farmers

Try

to create monopoly

Economically

backward class person will suffer

Conditions to Enter FDI

Amount
Places
Other

of investment

of opening stores

conditions

Limit on FDI various sectors of India

Sectors

FDI (%)

Agriculture

100

Civil Aviation

100

Courier Services

100

Commodity
Exchanges
Defense

49

Insurance

49

Multi Brand Retail

51

49

FDI In India In 2015

Country

Amount($)

UAE

4.5 Lakh Crore

Mauritius

9.03 Billion

Singapore

6.74 Billion

Mongolia

1 Billion

News Related To FDI

Government clears FDI proposals worth Rs. 10,379
crore
Maharashtra attracts $5 billion investment from
Foxconn
General Motors would invest $1 billion in India
South Korean steelmaker POSCOset up a new
steel plant in India.
FDI in Petroleum & Gas Jumps Ten Times

Foreign Institutional Investor(FII)

Institution

established or incorporated outside

India
Proposes

to make investment in securities in

India.
Registered

under Section 2 (f) of the SEBI (FII)

Regulations 1995.

Advantages of FII

Enhanced flows of equity capital

Improving capital markets.

Equity

market development aids economic

development
FII

inflows help in financial innovation

Development

of hedging instruments.

Disadvantages of FII

Problems of Inflation

Problems
Adverse
Hot

for Small Investors

Impact on Export

Money

Cant

be used for long term

WHY INDIA NEED FII ???.....

LARGE

UNEXPLOITED NATURAL
RESOURCES

TO SHARE TECHNICAL KNOW-HOW

TO BRING

IN NEW TECHNOLOGY IN

COUNTRY
TO SHARE

GOOD FOREIGN RELATION

AN FII CAN INVEST ONLY IN THE

FOLLOWING..
SECURITIES

IN THE PRIMARY &

SECONDARY MARKETS
MUTUAL FUNDS
GOVERNMENT SECURITIES
DERIVATIVES
COMMERCIAL PAPER
SECURITY RECEIPTS
INDIAN DEPOSITORY RECEIPTS

WHO CAN GET REGISTERED AS

FII ??...
PENSION

FUNDS
MUTUAL FUNDS
INVESTMENT TRUST
INSURANCE COMPANIES
UNIVERSITY FUNDS
FOUNDATION OR CHARITABLE TRUSTS
ASSET MANAGEMENT COMPANIES
POWR OF ATTORNY HOLDERS
BANK

NEWS RELATED TO FII

FIIs have sold Rs. 3,467 crore worth of Equities in
May
Foreign fund inflows cross Rs 81,000 crore mark in
2015
Government Bonds Over-Subscribed; FIIs Put in
Bids Worth Rs 974 Crore
FIIs have made a net investment of Rs 264 crore in
the domestic stock markets in August 2015.

Difference Between FDI and FII

1.

FDI

It is long-term investment

2. Investment

in

physical

assets
3. Aim

is to increase
enterprise capacity

4.

Leads
transfer

to

technology

FII

1. It

is generally short-term
investment

2. Investment

in financial assets

3.

Aim is to increase capital

availability

4.

FII results in only capital

inflows

5. Entry

and exist is relatively

and exit is relatively easy

6. Tends to be speculative
difficult

5. Entry
6. Does

not

tend

be

THANK YOU