MA FDI FII 250
-
Upload
tehseen-sayyed -
Category
Documents
-
view
214 -
download
0
Transcript of MA FDI FII 250
-
7/30/2019 MA FDI FII 250
1/11
Welcome to the sessions on
FDI/FII
-
7/30/2019 MA FDI FII 250
2/11
What are the benefits of FDI ?
What are the benefits of FDI:
Investing company in new markets:
Expansion of business opportunities in new markets(cross border locations)
Increase in global market share
Greater opportunity to earn more income/profits
Host nations: Receipt of foreign capital would increasethe Forex Reserves
Long term investments especially in selected sectorsviz., infrastructure
Generates employment opportunities
-
7/30/2019 MA FDI FII 250
3/11
-
7/30/2019 MA FDI FII 250
4/11
What about demerits of FDI?
Host nations: Stiff competition for domestic
players
Depletion of natural resources
Unfair/unethical trade practices
International legal frame work may create
more complications Smaller players may loose their opportunity to
do business
-
7/30/2019 MA FDI FII 250
5/11
Examples of FDI
Horizontal FDI: Firm duplicates its home country based activities in thehost country in the same value chain
- Vertical FDI: Firm moves up-stream or down stream in diffvalue(value adding activities) chains in host countries.
- Platform FDI: the output is (largely) sold in third markets rather
than in the parent or host markets. A firm in the high-costeconomies has a plant at home, and a plant in the low-cost countryto serve the other high-cost country. There is trade liberalizationbetween high cost & low cost country.
- In bound FDI: When a MNC invests in Indian Sector it is called as inbond FDI ex: Prudential invested in insurance sector through a JVwith ICICI
- Outbound FDI: When an Indian Company invests in a foreign nationit called as outbound FDI. Ex: TATA CORUS
-
7/30/2019 MA FDI FII 250
6/11
What/How?
What are the different forms of FDI and how
FDI helps in expansion of business?
FDI thro financial collaborations, private
equity or preferential allotments, by way of
capital markets thro euro issues & in joint
ventures.
-
7/30/2019 MA FDI FII 250
7/11
FII - Overview
These are organization which pool large sums ofmoney & invest in securities, real properties.
Investment in financial market is from the
investor registered outside India. Institutional investors are like hedge funds,
insurance company, pension & mutual funds.
The FII registered with SEBI come from manyforeign countries (including money managementcompanies operating in India on behalf of foreigninvestors).
-
7/30/2019 MA FDI FII 250
8/11
FII - benefits
Benefits of FII in the country e.g., INDIA:
1)Reduced cost of equity: FII augment thesource of funds, reduces required rate of
return, enhances stock prices.2)Stability in the balance of payment: The excess
of domestic investment over domestic savings
result un a current a/c deficit & this deficit isfinanced by capital flows in the balance ofpayments.
-
7/30/2019 MA FDI FII 250
9/11
FII - benefits
3)Inflation: The inflation is inversely proportionalwith foreign investment inflow.
4) Exchange rate: When the value of home
currency is stronger, the FII investment will alsoincrease as the % of returns the FII getautomatically increases & vice versa. So it can besaid that the inflation & risk in the domestic
country affects & return in foreign countryadversely affect the FII flowing in domesticcountry.
-
7/30/2019 MA FDI FII 250
10/11
FDI vs FII
FDI invests directly in the company (industry specific)whereas FIIs invest in listed shares of companies.
-FDI investment is viewed more positively because it investsdirectly in the company as compared to FII s who enter
through secondary market-FDI is long term capital whereas FII is short term capitalinvestment.
-Unlike FDI ,FII investments are more volatile in the sense theyenter and exit more frequently as and when
(i) they can book profits (ii) if, markets in other countriesare more attractive (iii) if, they can sense any sign of troublein the markets where they have invested
-
7/30/2019 MA FDI FII 250
11/11
Thanks and all the best regards