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A STUDY ON FII’S AND ITS IMPACT ON STOCK MARKETWORK CARRIED OUT FOR SBICAPS SECURITIES
Faculty GuideDr. B. Charumathi
Presented by: Uday Doyal
Company Profile
SBICAP Securities Ltd (SSL) is a 100% subsidiary of SBI Capital Markets Ltd SBI Capital Markets Ltd. commenced broking activities in March 2001 SBICAP Securities Ltd. (SSL) is a company, which has been formed to take over
the broking operations of SBI Capital Markets Ltd It is an Depository participant, dealing with trading, demat and other allied
services.
Objective of the Study
To study SEBI regulations on FIIs To study the trend of FII investment in Indian equity and debt
market To examine the relationship between the FII investment and Indian
Stock Market
Research Methodology
Research Type Analytical
Source: NSE,BSE ,SEBI & Indiainfoline database
Tools Used: •Correlation•Regression•ANOVA
Package Used: Ms Excel and Statistical Package for Social Science (SPSS)
Period of Study: •Year 2000-Year 2013 (till March)•Year 2008 & 2009 (Monthly)•Year 2012-13 (July’12 to June’13)-Daily
Hypotheses H0: No significant relationship between FII & Stock MarketH1: There is significant relationship between FII & Stock Market
What is FII ?
According to SEBI, “a Foreign Institutional Investor ("FII") is as an institution established or incorporated outside India which proposes to make investment in India in securities of companies incorporated in India (Indian Companies).”
FDI vs FII Foreign direct investment (FDI) is a direct investment into production or
business in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country
FII is allowed to invest upto 10% of the paid up capital of a company, which implies that any investment above 10% will be construed as FDI, though officially such a definition does not exist.
Advantage of FII inflows
To reduction in information asymmetries
Attracting foreign capital
improves the breadth and depth of Indian markets
financial innovation and development of hedging instruments
rupee appreciates.
Advantage
SEBI regulations for FII
A Foreign Institutional Investor may invest only in the following:-
securities in the primary and secondary markets including shares,
units of schemes floated by domestic mutual funds including Unit Trust of India,
dated Government Securities;
derivatives traded on a recognized stock exchange
Every FII/sub-account is required to appoint a domestic Indian custodian to hold in custody its Indian securities. Custodian of Securities is a registered and regulated entity by SEBI.
An FII can also invest in India on behalf of a sub-account which is registered as a sub-account under Section 2 (k) of the SEBI (FII) Regulations, 1995.
FII in India
The regulations for foreign investment in India have been framed by the Reserve Bank of India in terms of Sections 6 and 47 of the Foreign Exchange Management Act, 1999.
SEBI has been registering FIIs and monitoring investments made by them through the portfolio investment route under the SEBI (FII) regulations 1995.
India, the second fastest growing economy after China, has recently seen positive foreign institutional investor (FII) inflows driven by the sound fundamentals and growth opportunities
FII was allowed since September 1992, however, Investment by them were first made in January 1993
FII in India
2000-0
1
2001-0
2
2002-0
3
2003-0
4
2004-0
5
2005-0
6
2006-0
7
2007-0
8
2008-0
9
2009-1
0
2010-1
1
2011-1
2
2012-1
3*
-100,000.00
-50,000.00
0.00
50,000.00
100,000.00
150,000.00
200,000.00
-10000
0
10000
20000
30000
40000
50000
Equity Debt
FII Net Investment (Equity + Debt)
2000-0
1
2001-0
2
2002-0
3
2003-0
4
2004-0
5
2005-0
6
2006-0
7
2007-0
8
2008-0
9
2009-1
0
2010-1
1
2011-1
2
2012-1
3*
0.00
50,000.00
100,000.00
150,000.00
200,000.00
FII Net Investment
Net Investment
FII Vs SENSEXfor the year 2000-2013*
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-100,000.00
-50,000.00
0.00
50,000.00
100,000.00
150,000.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
Net Investment BSE Sensex
*till march 2013
FII Vs Niftyfor the year 2000-2013*
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
-100,000.00
-50,000.00
0.00
50,000.00
100,000.00
150,000.00
0
1000
2000
3000
4000
5000
6000
7000
Net Investment Nifty Closing Value
*till march 2013
Analysis using SPSS
Analysis FII & SENSEX FII & Nifty
Correlation 0.675 0.678
R2 0.456 .460
Sig. Level 0.008 0.008
The variables are correlated Positively.There exists significant relationship between FII & Indian Stock Market
2-Ju
l-12
13-Ju
l-12
24-Ju
l-12
4-A
ug-1
215-A
ug-1
226-A
ug-1
26-S
ep-1
217-S
ep-1
228-S
ep-1
29-O
ct-12
20-O
ct-12
31-O
ct-12
11-N
ov-1
222-N
ov-1
23-D
ec-1
214-D
ec-1
225-D
ec-1
25-Ja
n-1
316-Ja
n-1
327-Ja
n-1
37-F
eb-1
318-F
eb-1
31-M
ar-1
312-M
ar-1
323-M
ar-1
33-A
pr-1
314-A
pr-1
325-A
pr-1
36-M
ay-1
317-M
ay-1
328-M
ay-1
38-Ju
n-1
319-Ju
n-1
3
-4000
-2000
0
2000
4000
6000
8000
0
5000
10000
15000
20000
25000
Net FII Investment BSE
FII & SensexData collected on daily basis 2012-13*
*July 2012-June 2013
FII & NiftyData collected on daily basis 2012-13*
2-Ju
l-12
8-Ju
l-12
14-Ju
l-12
20-Ju
l-12
26-Ju
l-12
1-A
ug-1
27-A
ug-1
213-A
ug-1
219-A
ug-1
225-A
ug-1
231-A
ug-1
26-S
ep-1
212-S
ep-1
218-S
ep-1
224-S
ep-1
230-S
ep-1
26-O
ct-12
12-O
ct-12
18-O
ct-12
24-O
ct-12
30-O
ct-12
5-N
ov-1
211-N
ov-1
217-N
ov-1
223-N
ov-1
229-N
ov-1
25-D
ec-1
211-D
ec-1
217-D
ec-1
223-D
ec-1
229-D
ec-1
24-Ja
n-1
310-Ja
n-1
316-Ja
n-1
322-Ja
n-1
328-Ja
n-1
33-Fe
b-1
39-Fe
b-1
315-Fe
b-1
321-Fe
b-1
327-Fe
b-1
35-M
ar-1
311-M
ar-1
317-M
ar-1
323-M
ar-1
329-M
ar-1
34-A
pr-1
310-A
pr-1
316-A
pr-1
322-A
pr-1
328-A
pr-1
34-M
ay-1
310-M
ay-1
316-M
ay-1
322-M
ay-1
328-M
ay-1
33-Ju
n-1
39-Ju
n-1
315-Ju
n-1
321-Ju
n-1
327-Ju
n-1
3
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
0
1000
2000
3000
4000
5000
6000
7000
Net FII Investment NSE
*July 2012-June 2013
Analysis using SPSS
Analysis FII & SENSEX FII & Nifty
Correlation 0.232 0.247
R2 0.054 0.061
Sig. Level 0.000 0.000
Correlation coefficient is very low. Only 6% of data are influenced There exists significant relationship between FII & Indian Stock Market
FII & Sensexfor the year 2008 & 2009(Month wise)
Jan-0
8Feb-0
8M
ar-0
8A
pr-0
8M
ay-0
8Ju
n-0
8Ju
l-08
Aug-0
8Sep-0
8O
ct-08
Nov-0
8D
ec-0
8Ja
n-0
9Feb-0
9M
ar-0
9A
pr-0
9M
ay-0
9Ju
n-0
9Ju
l-09
Aug-0
9Sep-0
9O
ct-09
Nov-0
9D
ec-0
9
-20,000.00-15,000.00-10,000.00-5,000.00
0.005,000.00
10,000.0015,000.0020,000.0025,000.00
0.002,000.004,000.006,000.008,000.0010,000.0012,000.0014,000.0016,000.0018,000.0020,000.00
FII SENSEX
Analysis using SPSS
Analysis FII & SENSEX
Correlation 0.342
R2 0.117
Sig. Level 0.102
Correlation coefficient is positive. Only 11% of data are influenced There exists no significant relationship between FII & Indian Stock Market
Findings
Major portion of FII investments have come through the primary market, than through buying via secondary markets
The FII over a longer time frame has greater impact on Stock market when compared to short time frame.
FII can explain only about 50% of the movement of stock market. In the year 2008-09, US economy was under recession , this might be cause
of declining FII in 2008. In the year 2012-13, Indian economy have undergone many swings like
running inflation rate, falling rupee, rise in gold price. This all factors have greater impact on stock market movement than FII.
Market size, Political scenario, Labour cost and productivity, Liberalized Trade Policy, Infrastructure, Incentives and Operating conditions and Disinvestment policy were the causes of FIIs investment in India.
Conclusion
FII invest in bulk .This cause herding behaviour among the DII’s . FII investment in any company’s stock assumed to have growth potentials. When FII sells more and purchase less the significance level gets reduce and
thereby reducing the association between FII and Stock Market