INTRODUCTION

INTRODUCTION
A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place. This is a market of speculation. If speculation of investors become wrong than the investors loss. Nobody knows what will happen even after a Second.

A Stock Exchange refers to the segments of the capital market where the securities issued by corporate are trade. It is open auction market where buyers and sellers meet and Involve competitive prices of the securities. It reflects hopes aspiration fair of people regarding the performance of the economy. It provides necessary mobility to capital and direct flow of the capital into possible and successful enterprise.

Since buying and selling of the different of securities take place on stock exchange. The Prices of particular securities reflect their demand and supply. In fact, stock exchange is said to be a barometer of economy and financial health.

The stock market in India, Securities and Exchange Board of India (SEBI) is on the issue of acceptance of hedge funds into Indian financial market. At the sometime worldwide trade shows that hedge funds are important force to the reckoned with us. The impact of hedge funds activity is new to the Indian financial investors (FII) flows volatility of the Stock market. This is so because hedge funds activity in Indian primary through participatory notes (PN) and the some is reflected under FII inflows. Large stock operators and investment arms certain large corporate in India in the period consideration used to use oversees body (OCB) as a mechanism to take exposure to the India n market OCB activity in the Indian context is pretty similar to funds trading historically OCB flows also used to appear under the head of FII flows traditionally a large chunk of the PN and OCB activity in India use to

happen through the Mauritius route due to taxation benefits. With the latest budget presented by the Indian government .(will become Effective from 1st September 2004) reducing long term capital gains to zero and short term capital gains to 10 % the taxation to Mauritius to exist.

STOCK EXCHANGE
A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by Governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place. This is a market of speculation. If speculation of investors become wrong than the investors loss. Nobody knows what will happen even after a second.

A Stock Exchange refers to the segments of the capital market where the securities issued by corporate are trade. It is open auction market where buyers and sellers meet and involve competitive prices of the securities. It reflects hopes aspiration fair of people regarding the performance of the economy. I t provides necessary mobility to capital and direct flow of the capital into possible and successful enterprise. Since

buying and selling of the different of securities take place ion stock exchange. The prices of particularly securities reflect their demand and supply. In fact, stock exchange is said to be a barometer of economy and financial health. The stock exchange is the nerve center of capital market. The stock exchange discharges three essential functions in the process of capital formation not in raising resources for the corporate sector. It provides places for sale and purchase of securities i.e. share, bonds etc. . . . It provides linkage between the saving of household sector and investment in corporate sector of economy. It provides market quotation for shares debenture and bonds and serves as a role of Barometer, not only of the state of health of individual companies but also of the Economy as a whole.

Therefore, by providing market place quotation of the prices of shares and bonds or sort of collective judgment. Simultaneously reached by many buyers and sellers in the Market stock exchange serves the role of barometer, not only of the state of health of Individual companies but also of the nations economy as a whole.

OPERATIONAL DEFINITIONS STOCK MARKET

A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by Governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place.

MUTUAL FUNDS: - A Mutual fund is a trust that pools the saving of a number of Investors who share a common financial goal

FOREIGN DIRECT MARKET (FDI): - This category refers to international investment in which the investor obtains a lasting interest in an enterprise in

another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment.

FOREIGN INSTITUTIONAL INVESTOR (FII):- An investor or investment fund that is from of or registered in a country outside of the one in which it is currently

investing. Foreign institutional investors have made a sizable investment in Indian financial markets. There are currently about 1324 FIIs registered in India.

FOREIGN PORTFOLIO INVESTMENT (FPI):- FPI is a category of investment instruments that are more easily traded, may be less permanent, and do not represent a controlling stake in an enterprise. These include investments via equity instrument (stocks) or debt (bonds) of a foreign enterprise that does not necessarily represent a long-term interest

BULL MARKET: - A Bull market is a market that is consistently going up. It is a market where there is optimism of further rise batter, business results and other positive factors. Bull Market can sometimes continue for years, for investors this is the preferred market trend. However no bull Market can continue for very long.

BEAR MARKET: - Bear Market is a market that is showing a persistent downtrend. A 15-20% downward movement of the market generally termed as a bear market.

DIVERSIFICATION: - diversification is the technique of investing in unrelated business sectors simultaneous so that risk that affects a particular sector does not affect your overall investment. For example your portfolio of share includes sectors like Information Technology, Real estate capital Goods, Autos etc.Exchange rate of a nation's currency- Currency like other commodities rises or falls in price" with

demand. When investors leave, they sell their holdings in a country's currency and as demand falls, the "price" of that currency will also fall.

ECONOMIES OF SCALE: - Produces are often able to enjoy considerable production cost savings by buying inputs in bulk, mass-producing or retailing their end product. These lower costs achieved through expanded production are called Economies of Scale.

DEBT/EQUITY RATIO-The debt/equity ratio measures the extent to which a firms capital is provided by lenders (through debt instruments such as fixed-return bonds) or owners (through Variable-return stocks). A greater reliance on financing through debt can mean greater profitability for shareholders, but also greater risk in the event things go sour.

INTERNATIONAL MONETARY FUND-The IMF is an international organization of 186 member countries, established in 1947 to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment,

INSTITUTIONAL INVESTOR: - An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities and banks.

INTEREST RATES-Interest rates have a powerful effect on the volume of a nation's money Supply. By raising interest rates, i.e., making the cost of borrowing money more expensive, Governments or banks can decrease the money supply. A decrease in the money supply tends to be counter-inflationary, which makes a currency more valuable compared to other currencies.

MOST FAVORED NATION TREATMENT-The phrase "most favored nation" refers to the Obligation of the country receiving the investment to give that investment the same Treatment as it gives to investments from its "most favored" trading partner.

BALANCE OF PAYMENT-The Balance of Payments (BOP) is a statistical statement that summarizes, for a specific period (typically a year or quarter), the economic transactions of an economy with the rest of the world. It covers: All the goods, services, factor income and current transfers an economy receives from or provides to the rest of the world Capital transfers and changes in an economy's external financial claims and liabilities PORTFOLIO INVESTMENT covers the acquisition and disposal of equity and debt securities that cannot be classified under direct investment or reserve asset transactions. These securities are tradable in organized financial markets. FDI FLOWS AND STOCKS Through direct investment flows the investors builds up a direct investment stock (position), making part of the investors balance sheet. The FDI stock (position) normally differs from accumulated flows because of revaluation (changes in prices or exchange rates) and other adjustments like rescheduling or cancellation of loans, debt forgiveness or debt-equity swaps with different values. MULTINATIONAL COMPANIES (MNCs) are incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates. FOREIGN DIRECT INVESTOR A foreign direct investor is an individual, an Incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which have a direct investment enterprise that is a subsidiary, associate or branch operating in a country other than the country or countries of residence of the direct investor or investors

HOST ECONOMY is the country that receives FDI or FPI from the foreign investor(s). HOME ECONOMY is the country of origin/residence of the company that invests in the foreign economy/host economy.

SUBSIDIARY is an incorporated enterprise in the host country in which the foreign investor owns more than 50 per cent of the shareholders voting power or has the right to appoint or remove a majority of the members of this enterprises administrative, management or supervisory body. EQUITY CAPITAL comprises of equity in branches and ordinary shares in subsidiaries and associates. REINVESTED EARNINGS consist of the direct investors share of earnings not distributed as dividends by subsidiaries or associates and earnings of branches not remitted to the direct investor. OTHER CAPITAL covers inter-company debt (including short-term loans such as trade credits) between direct investors and subsidiaries, branches and associates. WTO World Trade Organization

FOREIGN INSTITUTIONAL INVESTMENT

FII (Foreign institutional investors) is used to denote an investors; it is mostly of the form of an institution or entity which invests money in the financial markets of country. The Term FII is most commonly used in India to companies that are established or incorporated Outside India, and is investing in the financial market of India .these investors must Register with the securities & Exchange Board of India (SEBI) to take part in the market. Statistical records provided by securities and Exchange Board of India (SEBI) indicated that both FIIs and domestic institutional investors together influenced market sentiment. As per the information provided in BSE India.com during fortnight from may 16th to May 31st 2006, the withdrawals by FIIs were to the extent of US$2.061billion.This explain the fact that sales of FIIs had a major impact on the market and this impact led to the crash Despite these observation, countries and firms are interested in attracting foreign capital Because it helps to create liquidity for both the firms stock and the stock market in general.

This leads to lower cost of capital for the firm and allows firm to compete more effectively. In the global market place. This directly benefits the economy and the country. Availability of foreign capital depends on many firm specific factors other than economic development of the country. Contempory research has investigated only the portfolio Preferences of FIIs from the viewpoint of fund management companies. This paper Attempts to examine the specific characteristics of the firms included in senility index (Sensex) of Bombay stock Exchange and their influence in attracting more foreign Institutional investment. The present study focuses on this issue in the Indian context. In fact, from among the Whole gamut of institutional reforms undertaken in India since the 1990s. gradual Abolishment of capital inflow barriers and foreign exchange restrictions, adoption of more Flexible exchange rate arrangement deserve a special attention at this juncture to re-Examine Whether India is approaching towards achieving the twin goals of stability and Efficiency of the financial system. There are 22 stock exchanges in India.

The first being the Bombay stock exchange (BSE) Which began formal trading in 1875, making it one of the oldest in Asia. Over the last few Years, there has been a rapid change in the India securities market, especially in the Secondary market. Advanced technology and online based transaction have modernized the Stock exchange. In terms of the number of companies listed and total market capitalization, the Indian equity market is considered large relative to the countrys stage of Economic development. FII include overseas pension funds, mutual funds, investment trust, asset management Company , nominee company , bank , institutional portfolio manager , university funds , Endowments ,foundations, charitable societies , a trustee or power of attorney holder incorporated or established outside India proposing to make proprietary investment or Investments on behalf of a broad based fund .FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client Accounts that the FII managers are known as subaccounts. A domestic portfolio Manager can also register itself as an FII to manage the .funds of sub accounts foreign Institutional investor means equity established or incorporated outside India which proposes to make investment in India. Positive tidings about the India economic combined with a fast-growing market have made India an attractive destination for foreign Institutional investors. FII is defined as an institution organized outside of India for the Purpose of making investment into the Indian securities market under the regulation Prescribed by SEBI.

SEBI generally takes 7 working days in granting FII registration. However, in cases where The information furnished by the application is incomplete, seven days shall be counted from the days when all necessary information sought, reaches SEBI in cases where the application is bank and subsidiary of a bank, SEBI seeks comments from the Reserve bank of India (RBI) in such cases, 7 working days would be counted from the day no objection is received from RBI.

The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to be renewed. Same as initial registration, along with Form A and all the relevant

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documents, the application are required to fill in additional form (Annexure 1) while applying for renewal. Us $5,000 needs to be paid for renewal of FII registration. The application for renewal should be submitted three month before expiry of the FII registration. 100%debt FIIs are debt dedicated FIIs which invest in debt securities only. The procedure for registration of FII/sub account, under 100% debt routes.

HISTORY OF FII
India opened its stock market to foreign investors in September 1992 and in 1993 Received portfolio investment from foreigners in the form of foreign institutional in equities. This has become one of the main channels of FII in India for foreigners. Initially, there were many terms and conditions which restricted many FIIs to invest in India .but in the course of time, in order to attract more investors,

SEBI has simplified many terms such as:

The ceiling for overall investment of FIIs was increased 24% of the paid up capital of Indian company. Allowed foreign individuals and hedge funds to directly register as FIIs. Investment in government securities was increased to US$ 5 billion. Simplified registration norms.

P-Notes (participatory notes) are not registered with the SEBI (securities & Exchange board of India) to invest in India stock markets. For example, India - based securities and then issue participatory notes to foreign investors. Any dividends or capital gain collected from the underlying securities go back to the investors. That is why they are also called offshore derivative notes are like contract notes transferable by endorsement and delivery. Secondly, some of the entities route their investment through participatory notes to take advantage of tax laws of certain preferred countries. Thirdly, Participatory Notes are popular because they provide a high degree of Anonymity, which enables large hedge funds to carry out their operations without disclosing their identity.

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The first question that we need to ask is the necessity of FIIs as an instrument For investment into India. This is not a common place of markets: if, for Example, a nonresident of the US or of England Chooses to invest in an American or English or a German stock, he does not have to told hold his Investment indirectly through an FII, but can hold it directly in his own name FIIs serve no economic purpose but exist in order to provide SEBI with bureaucratic Layer between a foreign investor and the regulator. It enables SEBI to pretend that it Controls foreign investors when in fact SEBI has no control on the ultimate investor. It is a good example of obscuring the true character of foreign investment in India Through a non-transparent and expensive set up. The P-Note is an additional twist in so without disclosing their identity. May 2004 and May 2006, has some common thing to say to the history of Indian stock market, on May 2006, global concerns over rising interest rates in the US and sustained FII outflows continued to take its toll on the market, dragging down the sensex to a three and a-half month low. Despite strong GDP growth and early onset of the monsoon, the mood remained extremely bearish as FIIs remained major sellers amid hints of a further rise in interest rates in the wake of inflationary trend in the US. The FII-led recovery in the sensex may help ease down concerns about heavy FII selling that caused a crash in the market in the past few weeks. FII pulled out fund to the tune $1.6bn in May, after pumping in over $4bn in January-April 06.

The ongoing transition In the international financial architecture is exhibiting Several features of which capital inflows are perhaps the most important. Emerging economic have experienced massive capital inflows, which in some cases have proved to be traumatic later. Whether such traumatic situations occurred. Due to incompatible macroeconomic and exchange rate policies or imprudent Banking policy or lack of liquidity in the market is a matter of debate at the Theoretical plane and an issue of future policy concern under country specific Conditions.

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Whether be the reason, the issue boils down to the fact whether such flows are properly paced and properly sequenced such that the inflow of capital is not excessive relative to the maturity of the system in which it must be absorbed: only then the capital flows can be sustained and systemic stability ensured.

This may be attained through structural and operational realignment of the domestic and financial sector variables of the economies exposed to global financial network. It is in this context that the inter linkage among the stock market, the most sensitive sector of the Economy, exchange rate, the barometer of external iteration and the FII flows indicator of capital surge needs to be addressed to what extent the stock market can internalize or In other words, can capture the information on these is a case in point. For otherwise there may arise the possibility of capital.

The number of listed companies increased from 5,968 in March 1990 to about 10,000 by may 1998 and market capitalization has growth 11 times during the same period. The debt market, however, is almost nonexistent in India even thought there has been a large volume of government bonds traded. Banks and financial institutional have been holding a substantial part of these bonds as statutory liquidity requirement. The portfolio restrictions on financial institution statutory requirement are still in place. A primary auction market for government securities has been created and primary dealer System was introduced in 1995. There are six authorized primary dealer. Currently, there Are 31 mutual funds, out of which 21 are in in the private sector. Mutual funds were opened to the private sector in 1992, earlier, in 1987. Banks were allowed to enter this business,

Breaking the monopoly of the unit trust of India (UTI), which maintains a dominant Position? Before 1992, many factors obstructed the expansion of equity trading. Fresh capital Issues were controlled through the capital issues control act. Trading practice was not transparent, and there was a large amount of insider trading recognizing the importance of increasing investor protection, several measures were enacted to improve the fairness of the capital market.

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The securities and Exchange board of India (SEBI) was established in 1988. Despite the rules it set, problem continued to exist, including those relating to disclosure criteria, lack of broker capital adequacy, poor regulating to disclosure criteria, lack of broker capital adequacy, and poor regulation of merchant banker and underwriter. There have been significant reforms in the regulation of the securities market since 1992 conjunction with overall economic and financial reforms.

In 1992, the SEBI Act was enacted giving SEBI statutory status as an apex regulatory Body. And a series of reforms was introduced to improve investor protection, automation of stock trading, integration of national markets, and efficiency of market operation.

Historical evolution of FII policy is summarized below

September 1992 FIIs allowed to invest by the government guidelines in all securities Both primary and secondary markets and schemes floated by mutual funds .single FIIs Invest 5 per cent and all FIIs allowed to invest 24 per cent of a companys issued capital Broad based fund 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 percent debt FIIs were permitted to give operational flexibility to FIIs. 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 1billion was assigned which was increased to USD1.75 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.

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Common ceiling 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 sub Accounts 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 to domestic asset management capability. March 2001 FII ceiling under special procedure enhanced ti 49 per cent .the objective was to increase FII participation. September 2001 FII ceiling under special procedure raised to sectoral capital. December 2003 FII dual approval process of SEBI and RBI changed to single approval process pf SEBI. The objective was to streamline the registration process and reduce the time taken for registration. November 2004 outstanding corporate debt limit increased to 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 billon prescribed. The limit on investment in government securities was enhanced to USD 2 billion 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, stock exchanges, depositories and Clearing Corporation. This is a decision taken by government following the mandating of demutualization and Corporation of stock exchanges. January and October 2007 FII allowed to invest USD 3.2 billion in government securities (limits were raised From USD 2 billion in two phase of USD 0.6 billon each in January and October) June 2008 while reviewing the external commercial borrowing policy, the government Increased the cumulative debt investment limits

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from US $ 3.2 billion to US $5 billion and US $ 1.5 billion to US $3 billion for FII investment in government securities and corporate debt, respectively. October 2008 while reviewing the external commercial borrowing policy, the Government increased the cumulative debt investment limits from US $3 billion to US $6 billion for FII investment in corporate debt. October 2008 removal of regulation for FIIs pertaining to restriction of 70:30 ratio investments in equity and debt respectively. March 2009 E-bids platform for FIIs to bid for allotments under over all FII debt limits. August 2009 FIIs allowed participating in interest rate future.

CAPITAL MARKET REFORMS AND DEVELOPMENTS

Over the last few years, SEBI has announced several far-reaching reforms to promote the Capital market and protect investor interest. Reforms in the secondary market have focused on three main areas: structure and functioning of stock exchanges, automation of trading and post trade systems, and the introduction of surveillance and monitoring systems. Computerized online trading of securities: and settings up clearing houses or settlement Guarantee funds were made compulsory for stock exchange. Stock exchanges were permitted to expand their trading to locations outside their Jurisdiction through computer terminals. Thus, major stock exchange in India have started locating computer terminals in far-flung are, while smaller regional exchanges are planning to consolidate by using centralized trading under a federated structure. Online Trading system has been introduced in almost all stock exchanges. Trading is much more transparent and quicker than in the past.

Until the early 1990s, the trading and settlement infrastructure of the Indian capital market was poor. Trading on all stock exchanges was through open outcry, settlement systems were paper-based, and market intermediaries were largely unregulated. The regulatory structure was fragmented and there was neither comprehensive registration

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boar an apex body of regulation of the securities market. Stock exchange was run as brokers clubs as their management was largely composed of brokers. There was no prohibition on insider trading or fraudulent and unfair trade practices.

Since 1992, there has been intensified market reform, resulting in a big improvement in securities trading, especially in the secondary market for equity. Most stock exchanges have introduced online trading and set up clearing houses/corporations. A depository has become operational for scrip less trading and the regulatory structure has been overhauled with most of the power for regulating the capital market vested with SEBI. The Indian capital market has experienced a process of structural transformation with operations conducted to standard equivalent to those in the development markets. It was opened up for investment by foreign institutional investors (FIIs) in 1992 and Indian companies were allowed to raise recourse abroad through global depository receipts (GDRs) and foreign Currency convertible bonds (FCCBs).

The primary and secondary segments of the capital market expanded rapidly, with greater Institutionalization and wider participation of individual investors accompanying this growth however, many problems. Including lack of confidence in stock investments, Institutional overlaps, and other governance issue remains as obstacles to the improvement of Indian capital market efficiency. India has seen a tremendous change in the secondary market for equity. Its equity market will most likely be comparable with the worlds most advanced secondary within a year or two.

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SENSEX MILESTONES
Here is a timeline on the rise and rise of the sensex though Indian stock market history.1000, July 25, 1990-on July 25, 1990, the sensex touched the four digit figure for the first Time and closed at 1001 in the wake of a good monsoon and excellent corporate results. 2000,Januvary 15,1992-on January 15,1992,the sensex crossed the 2000 mark and closed at 2020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current prime minister Dr Manmohan Singh.

3000, Februvary 29, 1992 on February 29, 1992, the sensex surged past the 3000mark in the wake of the market-friendly budget announced by the then finance minister, Dr Manmohan Singh. 4000 march 30, 1992-on march 30, 1992 the sensex crossed the 4000 mark and closed at 4\08\91 on the expectations of a liberal export-import policy. it was then that the harshad Mehta scam hit the market and sensex witnessed unabated selling 5000,October 11,1999-on October 8 1999, the sensex crossed the 5,000-mark as the BJP-led coalion won the majority in the 13th lokasabha election. 6000, February 11,2000 on February 11,2000, the InfoTech boom helped the sensex to cross the 6,000 mark and hit and all time high of 6,006. 7000 June 21,2005-on June 20,2005,the news of the of the settlement between the ambani brothers boosted investor sentiments and the scraps of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the sensex crossed 7000 points for the first time. 8000, September 8,2005- on september8,2005, the Bombay stock exchanges benchmark 30 share index-the sensex crossed the 8000 level following brisk buying by foreign and Domestic funds in early trading. 9000, December 09, 2995- the sensex on November 28, 2005 crossed 9000to touch 9000.32 points during mid-session at the Bombay stock exchange on the back of

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frantic Buying spree by foreign institutional investors and well supported by local operators as Well as retail investors. 10000, February 7, 2006-the sensex on February 6, 2006 touched 10,003points during mid-session. The sensex finally closed above the 10k-mrk on February 7, 2006. 11000 march 27, 2006 the sensex on March 21, 2006 crossed 11000 and touched a peak Of 11,001 points during mid-session at the Bombay stock exchange. 12000, April 20, 2006 The sensex on April 20, 2006 crossed 12000 and touch a peak at 42,004points during mid-session at the Bombay stock exchange for the first time.13000, October 30, 2006- the sensex on October 30, 2006 crossed 13000 and still riding high at the Bombay stock exchange for the first time. It took 135 days to reach 13000 from 12000. And 124 to reach 13000 from 12500.on 30th October 2006 it touched a peak of 13036.36 &closed at 13,024.26. 14000, december5, 2006-the sensex on December 5, 206 crossed 14000 and touched peak of 14028. Interpretations: 15000, July 6, 2007-the sensex on July 6, 2007 crossed another milestone and reached a Magic figure of 15000.it took almost 7 month and 1 day to touch such a historic milestone. 16000, September 19, 2007-The sensex on September 19, 2007 crossed the 16000 mark and reached a historic peak of 16322 while closing. The bull hits because of the rate cut of 50 bps in the discount rate by the Fed chief ben Bernanke in US. 17, 000, September 26, 2007-The sensex on September 26, 2007 crossed the 17,000 mark for the first time, creating a record for the second fastest 1000 point gain in just 5 trading sessions. It failed however to sustain the momentum and closed below 17000 .the sensex closed above 17000 for the first time on the following day. Reliance group has been the main contributor in this Bull Run contributing 256 points. This also helped MukeshAmbanis net worth to grow to over $50 billion or Rs.2 trillion .it was also during this record bull run that the sensex or the first time zoomed ahead of the Nikkei of Japan. 18000, October 9, 2007 the sensex crossed the 18k mark for the first time on October 9, 2007. This journey from 17k to 18k took just 8 trading session which is

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the third fastest 1000-point rise in the history of the sensex. The sensex closed at 18,280 at the end of day .This 788point gain on 9th October was the second biggest single day absolute gains.

19,000, October 15, 2007-the sensex crossed the 19k mark for the first time on October 15. The 2007. it took just 4 days to reach from 18k to 19k.this is the fastest 1000 points rally Ever and also the 640-point rally was the second highest single day rally in absolute terms. This made it a record 3000 point rally in 17 trading session overall

20,000, October 29, 2007-the sensex crossed the 20k mark for the first time with a massive 734.5 point gain but closed below the 20k mark. it took 11days to reach from 19k to 20k the journey of the 10,000 point was covered in just 869 sessions as against 7,297 sessions taken to touch the 10,000 mark from 1,000 levels. in 2007 alone, there were six 1,000-point Rallies for the sensex.

21, 000, January 8, 2008-the sensex opened with a huge positive gap of 157 points at 20, 970, and rallied past the 21, 00-mark to a fresh all-time high of 21,078.

FOREIGN INSTTUTIONAL INVESTMENTS(FIIS)

FIIs investments in the equity market have dipped to 522 crore with purchase worth Rs44, 645 crore and sales of Rs 44,123 crore as against rs 6689 crore in march, irrespective of the Rise in the number of FIIs registered with SEBI to 906 from 882 in the previous month. FIIs have invested US $ 4.03 billion as against US $ 3.5 billion in the corresponding period. Last year. Meanwhile, the share of FIIs in the total cash turnover of both the bourses has Stood at 33.68 per cent during the month.

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SEBI has, on April 05 allocated new limits for FIIs to invest in the debt market in line with the announcement made in this regard in the budget 2006-07, wherein the government had increased the limit on FII INVESTME

Foreign Institutional Investments (FIIS)

FIIS investments in the equity market have dipped to Rs 522 crore with purchases worth Rs 44,123 crore as against Rs 6,689 crore in March, irrespective of the rise in the number of FIIS registered with SEBI to 906 from 882 in the previous month. During the first four months of the calendar year 2006. FIIS have invested US $ 4.03 billion as against US $ 3.5 billion in the corresponding period last year. Meanwhile, the share of FIIS in the total cash turnover of both the bourses has stood at 33.68 percent during the month. SEBI has, on April 05, allocated new limits for FIIS to invest in the debt market in line with the announcement made in this regard in the budget 2006-07, wherein the government had increased the limit on FII investment in government securities from $1.75 billion to $2 billion and in corporate debt from $ 0.5 billion to $ 1.5 billion. Under the revised limits, the $2 billion investment in government securities by FIIS will be divided into a proportion of $1.75 billion for 100 percent debt FIIS and $250 million for 70:30 FII/sub U accounts. Similarly, the corporate debt limit of $1.50 billion will be shared as $1.35 billion for 100 percent debt FIIS and $150 million for 70:30 FIIS, it has also been clarified that FII investments will be restricted to listed debt securities of companies. The BSE Sensex or Bombay Stock Exchange Sensitive Index or BSE 30 is a valueweighted index composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE.

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MUTUAL FUNDS
In the financial year 2005-06 there has been a huge surge in the mobilizations by the private sector mutual funds through new fund offers (NFOs). The total amount mobilized via NFOs has risen by almost 173 percent to Rs 70,583 crore from Rs 25,811 crore in the previous financial year. Likewise, the assets under management (AUM) of the mutual funds have increased by almost 27 percent to Rs 23, 25,841 crore from 18, 33,602 crore in the last financial year. In April, the total amount mobilized via NFOs has registered a decline by almost 87 percent to Rs 2,918 crore from Rs 22,868 crore in the previous month, while the AUM have increased to Rs 2,57,499 from Rs 2,31,862 crore in March. Meanwhile, the share of mutual funds in the total cash turnover of both the bourses has stood at 8.49 percent.

FOREIGN EXCHANGE MARKET

The rupee dollar exchange rate in April has sharply depreciated against the dollar by around 36 paisa from Rs 44.97 to Rs 44.97 as on April 28. During the month, a variety of factors such as escalation in international crude oil prices and the resultant heavy dollar demand by oil companies have adversely affected the rupee-dollar exchange rates. In April, the RBI continued to intervene in the market to modulate the rupee movement, which has further aggravated the currencys weakness against the dollar. The month began with the rupee trading at Rs 44.61 per dollar amid robust FIIS inflows into the surging domestic equity market. But, subsequently the rupee movement has been adversely affected by the increased volatility in the domestic stock market due to a selling spree for the FIIs coupled with the RBI.s intervention in the market as it breached the psychologically important Rs 45 mark and has traded above the Rs 45 level for most part of the month. However, in the latter part of the month with the Chinese Central Bank raising its basic lending rates by 27 basis points to 5.85 percent and the Feds Chief signaling

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that it may pause its interest rate tightening policy has resulted in the rupee recovering smartly to end the month at Rs 44.97 per dollar. Meanwhile, in the forward premier market, all three tenures, viz., one month, threemonth and twelve month, have converged in the initial part of the month; though the one-month annualized premier have ruled above the other two tenures in the later part of the month.

23

RESEARCH DESIGN

24

TITLE OF STUDY: Impact of Foreign Institutional Investors on Indian Stock Market.

STATEMENT OF THE PROBLEM:

A critical study of the effectiveness of the Foreign Institutional Investment on Indian Stock Market and various factors that influences the dependency of Indian Stock Market on Foreign Institutional Investors, its impact on Domestic Companies, Government and various Investors etc.

OBJECTIVE OF STUDY:
To analyze the impact of Foreign Institutional Investors on the Indian Capital Market. To determine the factors that influences the dependency of Indian Stock Market on FII. To analyze graphically, the Stock Market returns of Net purchases and sales of FIIs in the sampling period. To analyze the Stock Market returns of Indices and determine FIIs Percentage change in Investment. To analyze the trends in FII Investment in India in the sampling period. To analyze the market capitalization of the listed companies in BSE due to the impact of FIIs.

25

RESEARCH METHODOLOGY
A research design is the framework or plan, which guides the collection of the date and analysis of the data. The purpose of the research design is to ensure that the data collected is accurate and relevant. Any research work requires clarity of objectives and a seet pattern, so that the objectives can be achieved efficiently. The research design of the project is Descriptive study.

DATA COLLECTION PROCESS Sources of data collection:

The whole study is based on the secondary sources of information.

Secondary sources:
Web based sources. Official website of RBI, SEBI. Official website of Stock Exchange (NSE,BSE) Newspapers Textbooks

SEBI guidelines.

PLAN OF ANALYSIS
Tools used for analysis:
The following tools have been used for the analysis: Line graph Percentage Analysis Cumulative market adjusted log returns.

26

CHAPTER SCHEME:
CHAPTER 1:
Introduction, Overview of the industry.

CHAPTER 2:
Research Design, Statement of the problem, Objective of the study, Plan of analysis, Review of the literature.

CHAPTER 3:
Company profile, History of the company.

CHAPTER 4:
Data Analysis and Interpretation of Data, data analysis tools used.

CHAPTER 5:
Findings, Conclusion and Recommendations.

27

LITERATURE REVIEW
a. Purpose of Literature Review The literature review section examines recent research studies, company Or industry reports that act as a bass for the proposed study. Related literature and secondary data gives comprehensive perspectives .earlier references will be helpful if the problem has a historical background. Always the literature survey. Reference should be to the original source. The literature applies to the study you are proposing. The literature may also explain the need for the proposed work to appraise the shortcoming and informational gaps in secondary data sources.

b. Methodology followed by author Very few studies have been carried out of India empirically to see the impact of FIIs investment on Indian stock market.

According to Dornburch and park (1995), foreign investors pursue positive feedback strategies, which make stock to overeat to change in Fundamentals.

Chalapathi Rao (1999) analyzed the investment exposure of five US-based India specific funds which suggested a close resemblance between FIIs investment profile and trading pattern at the BSE.

Batra (2003), using both daily and monthly data attempted to understand the trading behavior of FIIs and returns in Indian equity market .he found the strong evidences of FIIs chasing trends and adopting positive feedback and herding trading strategies. However, Batra did not find FIIs having any disabling impact on the equity market.

28

Chakrabarti (2002), made an empirical investigation to see the interrelationship between FIIs flows and equity returns in India using monthly data. He came with the evidence that the FIIs flows are highly correlated with equity returns in India. he also found that FIIs flows are more likely to be effect than the cause of these returns ,which contradicted the view that the FIIs determine market returns in general. As the Indian equity market is growing, the trend and future prospects in foreign institutional investments has become a topic of great concern .a recent research survey by Japan bank for international operations (JBIC), shows that in the next 3 years, India will be the most favored destination for Japanese investors. A smith barney (a CITI group division) study says estimated market value of foreign institutional investments in the top 200 companies in India (including ADRs and GDRs) at current market prices capitalization of BSE 200. It is established in literature that block shareholder influence the firm performance (Cho& padmanabhan, 2001) governance of listed companies plays an important role in foreign institutional investment decisions. Furthermore management of business run by family groups plays a distinctive role. When government becomes block shareholder their objective will be quite different from those of private investors. Douma, pallathian and kabir (2006) investigated the impact of foreign institutional investment on the performance of emerging market firms and found that there is positive effect of foreign ownership on firm performance. They also found impact of foreign investment on the business group affiliation of firms. is US$43 billon .this is 18% of the market

29

COMPANY PROFILE

30

COMPANY PROFILE
Vachana securities private limited (VSPL) is a leading brokerage, & Investment Advisory Firm with a reputation built on performance. With over a decade of rich and varied experience, a thorough knowledge of the markets, proficiency in risk management and innovative, focused research, we offer advice on investing in the equity and derivatives segment. First learn and then earn!!! We believe, in life or in that matter stock market first focus should be on learning and earning follows on its own. Its prerequisite to have proper knowledge in Stock market where uncertainty& volatility is too risky and painful. We grow with you!!!!! Growing together is the process of building relations and nation. This is our sole objective and vision.

Management Team Board of directors

Prof.CA.Rudramurthy CA, M.Com, MFM, M-Phil, PGDBA, PGDMM Managing Director, Vachana Securities Private Ltd, An academic prodigy and an Investment Guru, who is still in his late twenties, Prof.CA.Rudramurthy.BV, is a Chartered Accountant and holder of 5 Master degrees in the area of Finance and Control which includes M.Com, MFM, M-Phil, PGDBA Symbiosis and PGDMM. He has over a decade of teaching experience in top BSchools of Bangalore. Prof. Rudramurthy has written books on Income tax and has presented papers in various seminars. He is the managing director of Vachana

31

Securities Pvt ltd; a stock broking firm specialized in Capital market services. He is the course director and head of Seshadripuram Institute for studies in Chartered accountancy. He is the Founder Chairman of Technical Study India, an institute of excellence, which specializes in training students and working executives in the field of Technical trading systems and in the area of Capital Markets. His media presence on SAMAYA 24x7 and YOUCHANNEL as Investment Consultant to educate its viewers and also to give his advice on Current market trends. S.P Hombanna Director Vachana Securities Private Ltd, & Partner Soundarya Constructions Sharada Director Vachana Securities Private Ltd, Management Pratik S.B Compliance officer Sagar U.S Research Team Sumanth Kumar C.N Members: Bangalore Stock Exchange Ltd/BGSE Financials Traders: BGSE, BSE, NSE & DERIVATIVES

32

PRODUCTS AND SERVICE

D-Mat and Trading account. Investment Consultancy Services. Portfolio Management Services. Wealth Management Services. Investment, Positional & Intraday Trading Calls. Fundamental and Technical Research. Long term Investment calls. Swing trade and Positional trading Calls. Intraday trading tips. Offline Order placing. Second line of defense for your Investment/Trading ideas. Tax Planning and Savings. Courses on Capital Markets for real time Investment/Trading. Courses on Advanced Derivative Strategies for Portfolio hedging. Investor awareness programs. Online trading classes and assistance.

Other need based services as per client requirements. CORPORATE VISION As a corporate organization we aspire to combine excellence, quality and
timely service delivery with professionalism in general broking services to our highly cherished clients.

33

MISSION STATEMENT
To delegate individual investors to break through the fear of high costs and conflicts of traditional stock broking firms and plan their financial holding accordingly. It is the mission of Vachana Securities Pvt Ltd to provide excellent, quality, professional, and time bound Broking Services to highly cherished clients. In addition, Vachana Securities would offer expert Wealth Management Service.

STRENGHT
Our team is dedicated team of employees committed to provide excellent customer services Highly Knowledgeable professionals with over a decade of experience in Trading Investments.

INDUSTRY PROFILE

34

INVESTMENT IN INDIAN MARKET

India is believed to be a good investment despite political uncertainty, bureaucratic hassles, shortages of power and infrastructure deficiencies. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign players into the market. No company, of any size, aspiring to be a global player can, for long ignore this country, which is expected to become one of the top three emerging economies.

SUCCESS IN INDIA
Success in India will depend on the correct estimation of the country's potential; Under estimation of its complexity or overestimation of its possibilities can lead to failure. While calculating, due consideration should be given to the factor of the inherent difficulties and uncertainties of functioning in the Indian system. Entering India's marketplace requires a well-designed plan backed by serious thought and careful research. For those who take the time and look to India as an opportunity for long-term growth, not short-term profit- the trip will be well worth the effort.

MARKET POTENTIAL
India is the fifth largest economy in the world (ranking above France, Italy, the United Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. It is also the second largest among emerging nations. (These indicators are based on purchasing power parity). India is also one of the few markets in the world, which offers high prospects for growth and earning potential in practically all areas of business. Despite the practically unlimited possibilities in India for overseas businesses, the world's most populous democracy has, until fairly recently, failed to get the kind of enthusiastic attention generated by other emerging economies such as China.

35

LACK OF ENTHUSIASM AMONG INVESTORS

The reason being, after independence from Britain 50 years ago, India developed a highly protected, semi-socialist autarkic economy. Structural and bureaucratic impediments were vigorously fostered, along with a distrust of foreign business. Even as today the climate in India has seen a sea change, smashing barriers and actively seeking foreign investment, many companies still see it as a difficult market. India is rightfully quoted to be an incomparable country and is both frustrating and challenging at the same time. Foreign investors should be prepared to take India as it is with all of its difficulties, contradictions and challenges. Developing a basic understanding or potential of the Indian market Envisaging and developing a Market Entry Strategy and implementing these strategies when actually entering the market are three basic steps to make a successful entry into India. The Indian middle class is large and growing; wages are low; many workers are well educated and speak English; investors are optimistic and local stocks are up; despite political turmoil, the country presses on with economic reforms. But there is still cause for worries- Infrastructure hassles. The rapid economic growth of the last few years has put heavy stress on India's infrastructure facilities. The projections of further expansion in key areas could snap the already strained lines of transportation unless massive programs of expansion and modernization are put in place. Problems include power demand shortfall, port traffic capacity mismatch, poor road conditions (only half of the country's roads are surfaced) and low telephone penetration.

INDIAN BUREAUCRACY
Although the Indian government is well aware of the need for reform and is pushing ahead in this area, business still has to deal with an inefficient and sometimes still slow moving bureaucracy.

36

DIVERSE MARKET
The Indian market is widely diverse. The country has 17 official languages, 6 major religions, and ethnic diversity as wide as all of Europe. Thus, tastes and preferences differ greatly among sections of consumers. Therefore, it is advisable to develop a good understanding of the Indian market and overall economy before taking the plunge.

INTERNATIONAL PORTFOLIO FLOWS:

International portfolio flows, as opposed to foreign direct investment (FDI) flows, refer to capital flows made by individuals or investors seeking to create an internationally diversified portfolio rather than to acquire management control over foreign companies. Diversifying internationally has long been known as a way to reduce the overall portfolio risk and even earn higher returns. Investors in developed countries can effectively enhance their portfolio performance by adding foreign stocks particularly those from emerging market countries where stock markets have relatively low correlations with those in developed countries. International portfolio flows are largely determined by the performance of the stock markets of the host countries relative to world markets. With the opening of stock markets in various emerging economies to foreign investors, investors in industrial countries have increasingly sought to realize the potential for portfolio diversification that these markets present. It is likely that for quite a few years to come, FII flows would increase with global integration. The main question is whether capital flew in to these countries primarily as a result of changes in global (largely US) factors or in response to events and indicators in the recipient countries like its credit rating and domestic stock market return. The answer is mixed both global and country-specific factors seem to matter, with the latter being particularly important in the case of Asian countries and for debt flows rather than equity flows.

37

INDUSTRY PROFILE

INVESTMENT IN INDIAN MARKET

India is believed to be a good investment despite political uncertainty, bureaucratic Hassles, shortages of power and infrastructure deficiencies. India presents a vast Potentialfor overseas investment and is actively encouraging the entrance of foreign players into the market. No company, of any size, aspiring to be a global Player can, for long ignorethis country, which is expected to become one of the Top three emerging economies.

Success in India
Success in India will depend on the correct estimation of the country's potential; Underestimation of its complexity or overestimation of its possibilities can lead to failure While calculating, due consideration should be given to the factor of the inherent difficulties and uncertainties of functioning in the Indian system. Entering India's marketplace requires a well-designed plan backed by serious Thought and careful research. For those who take the time and look to India as an opportunity for long-term growth, not short-term profit- the trip will be well worth the effort.

Market potential
India is the fifth largest economy in the world (ranking above France, Italy, the United Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. It is also the second largest among emerging nations. (These indicators are based on purchasing power parity). India is also one of the few markets in the world, which offers high prospects for growth and earning potential in practically all areas of business. Despite the practically unlimited possibilities in

38

India for overseas businesses, the worlds most populous democracy has, until fairly recently, failed to get the kind of enthusiastic attention generated by other emerging economies such as China.

Lack of enthusiasm among investors

The reason being, after independence from Britain 50 years ago, India developed a highly protected, semi-socialist autarkic economy. Structural and bureaucratic impediments were vigorously fostered, along with a distrust of foreign business. Even as today the climate in India has seen a sea change, smashing barriers and actively seeking foreign investment, many companies still see it as a difficult market. India is rightfully quoted to be an incomparable country and is both frustrating and challenging at the same time. Foreign investors should be prepared to take India as it is with all of its difficulties, contradictions and challenges.

Developing a basic understanding or potential of the Indian market Envisaging and developing a Market Entry Strategy and implementing these strategies when actually entering the market are three basic steps to make a successful entry into India. The Indian middle class is large and growing; wages are low; many workers are well educated and speak English; investors are optimistic and local stocks are up; despite political turmoil, the country presses on with economic reforms. But there is still cause for worries- Infrastructure hassles. The rapid economic growth of the last few years has put heavy stress on India's Infrastructure facilities. The projections of further, expansion in key areas could snap the already strained lines of transportation unless massive programs of expansion and modernization are put in place. Problems include power demand shortfall, port traffic capacity mismatch, poor road conditions (only half of the country's roads are surfaced) and low telephone penetration.

39

Indian Bureaucracy
Although the Indian government is well aware of the need for reform and is pushing, ahead in this area, business still has to deal with an inefficient and sometimes still slow moving Bureaucracy.

Diverse Market
The Indian market is widely diverse. The country has 17 official languages, 6 Major religions, and ethnic diversity as wide as all of Europe. Thus, tastes and Preferences differ grectly amongections of consumers. Therefore, it is advisable to develop a good understanding of the Indian market and overall economy before taking the plunge.

INTERNATIONAL PORTFOLIO FLOWS:

International portfolio flows, as opposed to foreign direct investment (FDI) flows, refer to capital flows made by individuals or investors seeking to create an internationally diversified portfolio rather than to acquire management control over foreign companies. Diversifying internationally has long been known as a way to reduce the overall portfolio risk and even earn higher returns. Investors in developed countries can effectively enhance their portfolio performance by adding foreign stocks particularly those from emerging market countries where stock markets have relatively low correlations with those in developed countries. International portfolio flows are largely determined by the performance of the stock markets of the host countries relative to world markets. With the opening of stock markets in various emerging economies to foreign investors, investors in industrial countries have increasingly sought to realize the potential for portfolio diversification that these markets present. It is likely that for quite a few years to come, FII flows would increase with global integration. The main question is whether capital flew in to these countries primarily as a result of changes in global (largely US) factors or in response to events and indicators in the recipient countries like its credit rating and domestic stock market return. The answer is mixed both global and country-specific factors

40

seem to matter, with the latter being particularly important in the case of Asian countries and for debt flows rather than equity flows.

FOREIGN INSTITUTIONAL INVESTMENT IN INDIA:

MILESTONES

India embarked on a programme of economic reforms in the early 1990s to tie over its balance of payment crisis and also as a step towards globalisation. An important milestone in the history of Indian economic reforms happened on September 14, 1992, when the FIIs (Foreign Institutional Investors) were allowedto invest in all the securities traded on the primary and secondary markets,including shares, debentures and warrants issued by companies which were listedor were to be listed the stock exchanges in India and in the schemes floated bydomestic mutual funds. Initially, the holding of a single FII and of all FIIs, NRIs (Non-Resident Indians)and OCBs (Overseas Corporate Bodies) in any company were subject to a limit of 5% and 24% of the company's total issued capital respectively. ( In order to broad base the FII investment and to ensure that such an investment would not become a camouflage for individual investment in the nature of FDI (Foreign Direct Investment), a condition was laid down that the funds invested by FIIs had to have at least 50 participants with no one holding more than 5%. Ever since this day, the regulations on FII investment have gone through enormous changes and have become more liberal over time.

41

 (From November 1996, FIIs were allowed to make 100% investment in debt securities subject to specific approval from SEBI as a separate category of FIIs or sub-accounts as 100% debt funds. Such investments were, of course, subjected to the fund-specific ceiling prescribed by SEBI and had to be within an overall ceiling of US $ 1.5 billion. The investments were, however, restricted to the debt instruments of companies listed or to be listed on the stock exchanges. In 1997, the aggregate limit on investment by all FIIs was allowed to be raised from 24% to 30% by the Board of Directors of individual companies by passing a resolution in their meeting and by a special resolution to that effect in the company's General Body meeting. From the year 1998, the FII investments were also allowed in the dated (In 2000, the foreign corporate and high net worth individuals were also allows to invest as sub-accounts of SEBI-registered FIIs. FIIs were also permitted to seek SEBI registration in respect of sub-accounts. This was made more liberal to Include the domestic portfolio managers or domestic asset management companies. (40% became the ceiling on aggregate FII portfolio investment in March 2000. (This was subsequently raised to 49% on March 8, 2001 and to the specific sectoral cap in September 2001. (As a move towards further liberalization a committee was set up on March 13, 2002 to identify the sectors in which FIIs portfolio investments will not be subject to the sectoral limits for FDI.

42

 (Later, on December 27, 2002 the committee was reconstituted and came out with recommendations in June 2004. The committee had proposed that, 'In general, FII investment ceilings, if any, may be reckoned over and above prescribed FDI sectoral caps. The 24 per cent limit on FII investment imposed in 1992 when allowing FII inflows was exclusive of the FDI limit. The suggested measure will be in conformity with this original stipulation.' The committee alsohas recommended that the special procedure for raising FII investments beyond24 per cent up to the FDI limit in a company may be dispensed with by amendingthe relevant regulations.

( Meanwhile, the increase in investment ceiling for FIIs in debt funds from US $ 1billion to US $ 1.75 billion has been notified in 2004. The SEBI also has reducedthe turnaround time for processing of FII applications for registrations from 13 working days to 7 working days except in the case of banks and subsidiaries. All these are indications for the country's continuous efforts to mobilize more foreign investment through portfolio investment by FIIs. The FII portfolio flowshave also been on the rise since September 1992. Their investments have always been net positive, but for 1998-99, when their sales were more than their purchase

43

ACTS AND RULES FII registration and investment are mainly governed by SEBI (FII) Regulations, 1995. ELIGIBILITY FOR REGISTRATION AS FII: Following entities / funds are Eligible to get registered as FII: 1. Pension Funds 2. Mutual Funds 3. Insurance Companies 4. Investment Trusts 5. Banks 6. University Fund s 7. Endowments 8. Foundations 9. Charitable Trusts / Charitable Societies

Further, following entities proposing to invest on behalf of broad based funds (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) , are also eligible to be registered as FIIs: 1. Asset Management Companies 2. Institutional Portfolio Managers 3. Trustees 4. Power of Attorney Holders

INVESTMENT OPPORTUNITIES FOR FIIs The following financial instruments are available for FII investments a) 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; b) Units of mutual funds; c) Dated Government Securities;

44

d) Derivatives traded on a recognized stock exchange; e) Commercial papers.

Investment limits on equity investments

a) FII, on its own behalf, shall not invest in equity more than 10% of total issued capita lof an Indian company.

b) Investment on behalf of each sub-account shall not exceed 10% of total issued capital of an India company.

c) For the sub-account registered under Foreign Companies/Individual category, the, investment limit is fixed at 5% of issued capital. These limits are within overall limit of 24% / 49 % / or the sectoral caps a prescribed by, Government of India / Reserve Bank of India.

Investment limits on debt investments The FII investments in debt securities are governed by the policy if the Government of India. Currently following limits are in effect: lowing limits are applicable: For corporate debt the investment limit is fixed at US $ 500 million.

TAXATION The taxation norms available to a FII are shown in the table below. Nature of Income Tax Rate Long-term capital gains- 10% Short-term capital gains- 30% Dividend Income -Nil Interest Income- 20%

45

Long term capital gain: Capital gain on sale of securities held for a period of more than one year. Short term capital gain: Capital gain on sale of securities held for a period of less than one year.

BRIEF PROFILE OF IMPORTANT INSTITUTIONS: A brief profile of important institutions included in the study is given below.

RESERVE BANK OF INDIA

India's Central Bank - the RBI - was established on 1 April 1935 and was nationalized on1 January 1949. Some of its main objectives are regulating the issue of bank notes, managing India's foreign exchange reserves, operating India's currency and credit system with a view to securing monetary stability and developing India's financial structure inline with national socio-economic objectives and policies.

The RBI acts as a banker toCentral/Stategovernments, commercial banks, state cooperative banks and some financial institutions. It formulates and administers monetary policy with a view to prices while encouraging higher production through appropriate deployment of credit. The RBI plays an important role in maintaining the exchange value of the Rupee and acts as an agent of the government in respect of India's membership of IMF. The RBI also performs a variety of developmental and promotional based commercial banking structure. While this concern has grown to comprehend the operations of all financial institutions, including the several groups of non-bank financial intermediaries, the commercial banks remain the core of the banking system. A central bank must also cooperate closely with the national government. Indeed, most governments and central banks have become intimately associated in the formulation of policy. They are often responsible for formulating and implementing monetary and credit policies, usually in cooperation with the government. They have been established specifically to lead or regulate the banking system.

46

SECURITUIES AND EXCHANGE BOARD OF INDIA

In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government Control, a statutory and autonomous regulatory board with defined responsibilities, to cover both development &regulation of the market and independent powers has been set up.

The basic objectives of the Board were identified as:

To protect the interests of investors in securities; To promote the development of Securities Market; To regulate the securities market and For matters connected therewith or incidental thereto. Since its inception SEBI has been working targeting the securities and is attending to theu filament of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements, margining, establishment of clearing corporations etc. reduced the risk of credit and also reduced the market. SEBI has introduced the comprehensive regulatory measures, prescribed registration norms, the eligibility criteria, the code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc. which has made dealing in securities both safe and transparent to the end investor. Another significant event is the approval of trading in stock indices (like S&P CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective product because of the following reasons:

47

It acts as a barometer for market behavior; It is used to benchmark portfolio performance; It is used in derivative instruments like index futures and index options; It can be used for passive fund management as in case of Index Funds. Two broad approaches of SEBI is to integrate the securities market at the national level, and also to diversify the trading products, so that there is an increase in number of traders including banks, financial institutions, insurance companies, mutual funds, primary dealers etc. to transact through the Exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000AD is a real landmark.

BOMBAY STOCK EXCHANGE: Of the 22 stock exchanges in the country, Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the privilege of getting permanent recognition ab-initio. Approximately 70,000 deals are executed on a daily basis, giving it one of the highest per hour rates of trading in the world. There are around 3,500 companies in the country which are listed and have a serious trading volume. The market capitalization of the BSE is Rs.5 trillion. The BSE `Sensex' is a widely used market index for the BSE. The main aims and objectives of the BSE are to provide a market place for the purchase and sale of security evidencing the ownership of business property or of a public or business debt. It aims to promote, develop and maintain a well-regulated market for dealing in securities and to safeguard the interest of members and the investing public having dealings on the Exchange. It helps industrial development of the country through efficient resource mobilization. To establish and promote honorable and just practices in securities transactions

48

BSE Sensex
The BSE Sensex is a value-weighted index composed of 30 companies with the base April 1979 = 100. It has grown by more than four times from January 1990 till date. The set of companies in the index is essentially fixed. These companies account for around one-fifth of the market capitalization of the BSE.

NATIONAL STOCK EXCHANGE OF INDIA

The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommende promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.

S&P CNX Nifty

S&P CNX Nifty is a well-diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL have a consulting and licensing

49

agreement with Standard & Poor's (S&P), who are world leaders in index services. The average total traded value for the last six months of all Nifty stocks is approximately 58% of the traded value of all stocks on the NSE Nifty stocks represent about 60% of the total market capitalization as on March 31, 2005. Impact cost of the S&P CNX Nifty for a portfolio size of Rs.5 million is 0.07% S&P CNX Nifty is professionally maintained and is ideal for derivatives trading.

50

DATA ANALYSIS AND INTERPRETATION

51

Table 4.1 showing the investors awareness about the FIIs:

Awareness yes no total Analysis:
The above table shows the investors perceptions towards the FIIs. From the 20 samples, there are 100% of investors aware about the FIIs.

no. of respondents 20 0 20

percentage 100% 0% 100%

Graph 4.2 showing the investors awareness about the FIIs:

no. of respondents
0%

yes no

100%

Interpretation: From the above analysis it can be interrelated that, most of the investors know about the foreign institutional investments.

52

Table 4.3 showing the investors knowledge about FIIs:

Knowledge complete partial nil total
Analysis: The above table shows the investors knowledge about FIIs. 75% of investors know about the foreign institutional investments. 25% of investors selected partial. Which shows 25% of investors partially know about the FIIs?

no. of respondents 15 5 0 20

Percentage 75% 25% 0 100%

Graph 4.4 shows the investors knowledge about FIIs:

no. of respondents
nil

partial

no. of respondents

complete

10

15

20

Interpretation: The above graph shows that the investors the investors perception towards the knowledge about FIIs. Which shows the investors are more knowledgeable about the foreign institutional investment? From this we can analysis that foreign institutional investment .is becoming more popular.

53

Table 4.5 showing the purpose for trading in FIIs?

Purpose bill of exchange sales orders equity foreign exchange total
Analysis: The above table shows that investors perception towards the purpose for trading in FIIs.52%of investors have selected bills of exchange .24%of investors have selected sales returns .14% of investors have selected equity .10%of investors have opted foreign exchange.

no. of respondents 11 5 3 2 20

Percentage 52% 24% 14% 10% 100%

Graph 4.6 shows the purpose for trading in FIIs

no. of respondents
10% 14% 52% 24% bill of exchange sales orders equity foreign exchange

Interpretation: From the above table analysis we can interpret that most of the investors are investing for bills of exchange. This shows that bill of exchange is showing good result in foreign institutional investment.

54

Table 4.7showing the following areas where investors like to invest.

Areas Equity Venture capital Preference Debentures
total Analysis: The above table shows that the investors perception towards the area where

no. of respondents
10 5 5 0 20

percentage
50% 25% 25% 0% 100%

FIIs.50% of investors preferred equity. 25% of investors preferred venture capital.25% of investors preferred preference, where debenture are not having value in FIIs.

Graph 4.8 shows the following areas where FII like to invest.

12

no. of respondents

10 8 6 4 2 0 Equity Venture capital Preference Debentures no. of respondents

options

Interpretation From the above analysis we can interpret that most of the investors are selected equity. This gives more profit and security and also popular in foreign institutional investment

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Table 4.9showing the factor influence the FII to invest in Indian stock
market Factors Liquidity Ease of investment Security higher return total Analysis:
From the above table that the investors perception towards the factors which influences the Indian stock market, 50% of investors selected liquidity .15% investors opted ease of investments .15%of investors preferred security 20% of investors selected higher return.

no. of respondents
10 3 3

percentage
50% 15% 15% 20% 100%

4
20

Graph 4.10 shows the factor influence the FII to invest in Indian stock
market.

no. of respondents
20% Liquidity 50% Ease of investment Security

15%

15%

Interpretation From the above analysis we can interpret that most of the investors are selected equity. This gives more profit and security and also popular in foreign institutional investment

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Table 4.11 showing the amount of money you are investing in normally.
Amount below 2,00,000 2,00,000 to 5,00,000 5,00,000 to 10,00,000 above 10,00,000 total
Analysis : The above table shows that the amount of money, money which are opted by investors.25% of investors preferred below 200000 .25%of people opted 2lakh to 5lakhs.35% of investors preferred above 10 lakhs

no. of respondents
5 5 3 7 20

percentage 25.00% 25.00% 15.00% 35.00% 100.00%

Graph 4.12shows the amount of money you are investing in normally.

no. of respondents
above 10,00,000 5,00,000 to 10,00,000 no. of respondents 2,00,000 to 5,00,000 below 2,00,000 0 2 4 6 8

Interpretation: From the above analysis we can interpret most of the investors are investing more than10 lakhs from this we can analyze that the foreign institutional investment are becoming more popular and which is yielding more returns.

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Table 4.13showing the trade

options

Phone calling Walk-in through software

total Analysis:

no. f respondents 8 5 7 20

percentage 40% 25% 35% 100%

The above table shows that the investors way of trading 40%of investors trade through phone calling .25%of investors trade through walk in .35%of investors trade though software

Graph 4.14shows the trade

no. f respondents
8 7 6 5 4 3 2 1 0 Phone calling Walk-in through software

no. f respondents

Interpretation: From the above table we can interpret that most of the investors trade through phone calling.

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Table 4.15showing the goals which FIIs looking in Indian stock market.
Goals Profitability Expansion Diversification Wealth maximization total
Analysis: The above table shows that the investors goals towards FIIs.50% of investors goals is profitability.15% of investors goal is expantion.10% of investment invest for diversification.25%of investors invest for wealth maximization.

no. of respondents
10 3 2 5 20

percentage
50% 15% 10% 25% 100%

Graph 4.16shows the goals which FIIs looking on Indian stock market

no. of respondents
Wealth maximization Diversification Expansion Profitability 0 2 4 6 8 10 no. of respondents

Interpretation: From the above table we can interpret that most of the investors are investing for profitability and second higher option is for wealth maximization this shows that investors are conscious towards profitability and wealth maximization.

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Table 4.17showing the percentage of returns of net purchase and sales

by FIIs
options

no. of respondents
5 3 5 7 20

percentage
25% 15% 25% 35% 100%

15% 20% 25% 30%

total Analysis:

The above table shows that the percentage of returns of net purchases and sales by FII 25% of investors have selected 15% .15% of investors have selected 20%.25% of investors have selected 25% of purchase and sales 35% of investors are preferred 30% of net purchase and sales.

Graph 4.18 shows the percentage of returns of net purchase and sales by
FIIs

700% 600% 500% 400% 300% 200% 100% 0% 1 2 3 4 options no. of respondents

Interpretation: From the above table we can interpret that most of the investors opted 35% of net purchase and sales by FIIs. This shows that Indian is having more return from purchase and sales by FIIs.

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Table 4.19showing the other factors which FIIs stock index depends
Factors Government policies Budget Bullion market Inflation total no. of respondents
3 8 4 5 20

percentage
15% 40% 20% 25% 100%

Analysis: From the above table that the investors perception towards stock index which depends on FIIs .15%of investors opted government policies. 40%of investors opted budget .20% of investors preferred bullion market. 25% of investors selected inflation.

Graph 4.20shows the other factors which FIIs stock index depends

no. of respondents
9 8 7 6 5 4 3 2 1 0 Budget Government policies Bullion market Inflation

no. of respondents

Interpretation: From the above graph we can interprets that, most of investors selected that FIIs stock index depends on budget. And the second higher rank is given for inflation these both of the factors influence the foreign institutional investment.

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Table 4.21 showing the benefits can enjoy by the FIIs in index stock market.
Benefits Reduced costing equity Stability in the balance of payment Knowledge flows Improving market efficiency total
Analysis: The above shows that the investors perception towards the benefits of FIIs to Indian stock market.25% of investors opted reduced costing equity. 25% of investors

no. of respondents
5 5 5 5 20

percentage
25% 25% 25% 25% 100%

selected stability in the balance of payment .25% of investors selected knowledge flows .25% of investors selected improving market efficiency.

Graph 4.22shows the benefits can enjoy by the FIIs in index stock market.

no. of respondents
5 4 3 2 1 0 Reduced Stability in the costing equity balance of payment Knowledge flows Improving market efficiency no. of respondents

Interpretation: From the above graph we can interprets that, the investors getting benefits from Indian stock market.

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Table 4.23showing the correlation between Nifty & Sensex.

options Yes No total
Analysis: The above shows that the investors perception towards the correlation between nifty and sensex .100% of investors opted yes .which result they agree with this statement that there is a correlation between nifty and sensex .which are the most popular indexes.

no. of respondents
20 0 20

percentage
100% 0% 100%

Graph 4.24shows the correlation between Nifty & Sensex.

no. of respondents

Yes No

Interpretation: From the above graph we can interprets that, most of investors agree with the statement that here is a correlation between nifty and sensex.

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Table 4.25 showing the particulars looking by FIIs in Indian stock

market. Particulars Market capitalization Number of listed securities Listing agreement Settlement total no. of respondents
10 3 2 5 20

percentage
50% 15% 10% 25% 100%

Analysis: The above shows that the investors perception towards the impact of facilities in Indian stock market .50% of investors selected market capitalization 15% of investors selected number of listed securities. 10% of investors selected listing agreement .25% of investors Selected settlement.

Graph 4.26shows the particulars looking by FIIs in Indian stock market.

6 5 4 3 2 1 0 0 -1 0.2 0.4 0.6 0.8 1 1.2 options Number of listed securities Settlement

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Interpretation: From the above graph we can interprets that, most of investors are conscious about market capitalization and second higher is for settlement .This shows most of the investors are needs market capitalization which gives more returns.

Table 4.27showing the impact analyzed by stock market.

Impact Price relationship Risk & return
total Analysis: The above shows that the investors perception towards the impact of stock market 50% of the investors selected price relationship .50% of investors selected risk and return

no. of respondents
10 10 20

percentage
50% 50% 100%

Graph 4.28 shows the impact analyzed by stock market.

no. of respondents

Risk & return

no. of respondents Price relationship

10

12

Interpretation: From the above graph we can interprets that, most of investors are conscious about price relationship and risk return are also have the same demand I stock market.

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Table 4.29showing the reason for Sensex falling down?

options Investor they take return back Market correction Budget effect total
Analysis : The above shows that the investors perception towards the reason for sensex falling down .35%of investors they take return back 25% of investors selected market correction .40%of investors selected budget effects.

no. of respondents
7 5 8 20

percentage
35% 25% 40% 100%

Graph 4.30shows the reason for Sensex falling down.

no. of respondents
8 7 6 5 4 3 2 1 0 Investor they take return back Market correction Budget effect

no. of respondents

Interpretation: From the above graph we can interprets that, most of investors selected budget effects. which effects the FIIs investment .if the sensex falls down it effects budget .

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Table 4.31showing the invest in foreign exchange.

options Yes No
total Analysis: The above shows that the investors perception towards the foreign exchange .from the 20 samples 100%of investors would like to invest in FIIs .and there is no investors for the options NO.

no. of respondents
20 0 20

percentage
100% 0% 100%

Graph 4.32shows the invest in foreign exchange

no. of respondents
20 15 10 5 0 Yes No no. of respondents

Interpretation: From the above graph we can interprets that, most of investors know about the foreign exchange .and they would like to invest in FIIs.

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Table 4.33showing the investors selected sectors for investment

Sectors Share market Banking sector Gold Real estate total
Analysis: The above shows that the investors perception towards the investing technique in FIIs .35%of investors selected share market .25%of the investors selected banking .25%of investors selected gold &15%of investors opted real estate.

no. of respondents
7 5 5 3 20

percentage
35% 25% 25% 15% 100%

Graph 4.34showing the investors selected sectors for investment

no. of respondents
8 7 6 5 4 3 2 1 0 Share market Banking sector Gold Real estate no. of respondents

Interpretation: From the above graph we can interprets that, most of most of investors know about the foreign exchange .and they would like to invest in FIIs.

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Table 4.35showing the inflation impact on FIIs.

options Lower exporting Less sales returns Lower value of the money total no. of respondents
8 7 5 20

percentage
40% 35% 25% 100%

Analysis:
The above shows that the investors perception towards the table inflation impact on FIIs .40% of investment selected lower exporting .35% of investors opted less sales return .25% of investors selected lower value of the money.

Graph 4.36 shows the inflation impact on FIIs.

no. of respondents
9 8 7 6 5 4 3 2 1 0 Lower exportingLess sales returns Lower value of the money no. of respondents

Interpretation: From the above graph we can interprets that, most of investors selected lower exporting. This shows that the investors are more conscious about the lower exporting which impacts on inflation.

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Table 4.37 showing long have you been indulged in FIIS.

options a) Less than a year b) More than a year c) More than three years d) More than five years total
Analysis: The above table shows that the investors perception towards the investing period 25% of investors opted less than a year 15% of investors selected more than a year .25% of investors selected more than 3 year 35% of investors opted more than 5 year.

no. of respondents
5 3 5 7 20

percentage
25% 15% 25% 35% 100%

Graph 4.38 shows long have you been indulged in FIIS.

no. of respondents

a) Less than a year b) More than a year c) More than three years d) More than five years

Interpretation: From the above graph we can interprets that, most of investors are dealing in FIIs from more than 5 year this shows that the foreign institutional investment is more popular.

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Table 4.39showing the type of settlement do you prefer in FIIs.

options a) Cash settlement b) Through on line account c) Cheque delivery d) Other specify total no. of respondents
5 10 5 0 20

percentage
25% 50% 25% 0% 100%

Analysis:
The above table shows that the investors perception towards the type of settlement 25%of investors selected cash settlement.50% of investors selected though online a/c .25% of investors selected cheque delivery.

Graph 4.38 shows the type of settlement do you prefer in FIIs

no. of respondents
a) Cash settlement b) Through on line account c) Cheque delivery d) Other specify

Interpretation: From the above graph we can interprets that, most of investors trade though online account. Which is less time consumable and they can trade speedily.

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FINDINGS

72

FINDINGS:
1. The FIIs is showing good results. The investors are more knowledgeable about foreign institutional investment .the organizational activities are interacting in FIIs .so the investors are contributing in different sectors. 2. The percentage of liquidity of FIIs is increasing compared to investment .but there is an growth of higher return also ,where the FIIs are becoming popular &more complex in its dealing .the different factors like, liquidity, higher return ,ease of investment &security these are influencing FIIs in as profitable. 3. The goals of investors are towards profitability, Expansion, diversification, wealth maximization. 50% of investors are conscious towards profitability 4. The investors are investing more than10 lakhs from this we can analyze that the foreign institutional investment is becoming more popular and which is yielding more returns. 5. Investors opted higher value of net purchase and sales by FIIs. This shows that Indian is having more return from purchase and sales by FIIs.

6. Investors selected that FIIs stock index depends on budget. And the second higher
rank is given for inflation these both of the factors influence the foreign institutional investment. 7. The investors getting benefits from Indian stock market. 8. Most of investors agree with the statement that here is a correlation between nifty and sensex. 9.The investors are conscious about market capitalization and second higher is for settlement .This shows most of the investors are needs market capitalization which gives more returns. 10. The investors are conscious about price relationship and risk return are also have the same demand I stock market. 11. Investors selected budget effects. Which effects the FIIs investment .if the sensex falls down it effects budget.

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12. Most of investors know about the foreign exchange .and they would like to invest in FIIs. 13. Most of most of investors know about the foreign exchange .and they would like to invest in FIIs. 14. Investors selected lower exporting. This shows that the investors are more conscious about the lower exporting which impacts on inflation.15. Most of investors are dealing in FIIs from more than 5 year this shows that the foreign institutional investment is more popular.16. Investors trade though online account. From this most of the investors knows to trade through online which is less time consumable and they can trade speedily.

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SUGGESTIONS

75

SUGGESTIONS:
After the analysis of the project study, following recommendations can be made 1. A significant presence of FIIs in India can improve market efficiency through two channels First, when adverse macroeconomic news, such as a bad monsoon, unsettles many domestic investors, it may be easier for a globally diversified portfolio manager to be more dispassionate about Indias prospects, and engage in stabilizing trades. Seconds, at the level of individual stocks and industries. 2. There are concerns that foreign investors are chronically will informed about India, and this lack of sound information may generate herding (a large number of FIIs buying or selling together) and positive feedback trading (buying after positive returns, selling after negative returns). These kinds of behavior can exacerbate volatility, and push prices away from fair values. 3. Simplifying procedures and relaxing entry barriers for business activities and providing investor friendly laws and tax system for foreign investors. 4. Allowing foreign investment in more areas. In different industries indices the FIIs should be encouraged through different patterns like futures, options, etc. 5. Somewhere, a restriction related to the track record of Sub-Accounts is also to be made on the investors who withdraw money out of the Indian stock market who have invested with the help of participatory notes. 6. We have to modernize and also have to save our culture. Similarly the laws should be such that it protect domestic investors and also promote trade in country through FIIs. 7. Encourage industries to grow to make FIIs an attractive junction to invest.

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CONCLUSION

77

CONCLUSION:
From all the above discussion and questionnaires, we can conclude that FIIs has a major impact in Indian stock market. Particularly, in the introduction part there is just a speculation about government plan to control P-Notes had caused the biggest fall in the Indian stock market, even market had to be closed for one hour without trade the impact is that even the domestic players and mutual funds also follow a close look on FIIs. So if, FIIs are confident in Indian markets, there is a general participation that market is on good condition. From the graphs drawn in the above parts, we can see that the major parts like, purpose of bill of exchange, the investors selected areas like equity and venture capital factors like, liquidity, security, goals like profitability and wealth maximization and impact on FIIs by stock markets can be analyzed and the investment & volatility are showing the good results in stock market.

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BIBLIOGRAPHY

79

BIBLIOGRAPHY
www.nse.india.com www.sebi.co.in www.centrum.co.in www.bse.co.in www.indianinfoline.com

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ANNEXURE

81

Name: Age: Qualification: Occupation: 1) Do you know about the foreign institutional investments? a) Yes b) No 2) Knowledge related to the FIIs? a) Complete b) Partial c) Nil 3) What is your purpose for trading in FIIs? a) Bills of payment b) Foreign exchange c) Sales order d) Equity 4) Which are the following areas where FII like to invest? a) Equity b) Venture capital c) Preference d) Debentures 5) Which factor influence the FII to invest in Indian stock market? a) Higher return b) Liquidity c) Ease of investment d) Security

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6) What is the amount of money you are investing in normally? a) Below 2, 00,000 b) 2, 00,000 to 5, 00,000 c) 5, 00,000 to 10, 00,000 d) Above 10, 00,000 7) How do you trade? a) Phone calling b) Walk-in c) Through software 8) What are the goals which FIIs looking on Indian stock market? a) Profitability b) Expansion c) Diversification d) Wealth maximization 9)Is the percentage of returns of net purchase and sales by FIIs? a) 15% b) 20% c) 25% d) 30% 10) Which are the other factors which FIIs stock index depends? a) Government policies b) Budget c) Bullion market d) Inflation

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11)What are the benefits can enjoy by the FIIs in index stock market? a) Reduced costing equity b)Stability in the balance of payment c) Knowledge flows d) Improving market efficiency 12) Is there any correlation between Nifty & Sensex? a) Yes b) No 13)Which are the particulars looking by FIIs in Indian stock market? a) Market capitalization b) Number of listed securities c) Listing agreement d) Settlement 14) What is the impact which analyzed by the FIIs in Indian stock exchange? a) Price relationship b) Risk & return 15) What is the reason for Sensex falling down? a) Investor they take return back b) Market correction c) Budget effect 16) Would you like to invest in foreign exchange? a) Yes B) No

17) Where would you like to invest your capital? a) Share market b) Banking sector c) Gold d) Real estate

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18) How does inflation impact on FIIs? a) Lower exporting b) Less sales returns c) Lower value of the money d) Beneficial to the domestic market 19) How long have you been indulged in FIIS? a) Less than a year b) More than a year c) More than three years d) More than five years 20) What type of settlement do you prefer in FIIs? a) Cash settlement b) Through on line account c) Cheque delivery d) Other specify .

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