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An application for registration has to be made in Form A, theformat of which is provided in the SEBI(FII) Regulations, 1995and submitted with under mentioned documents in duplicateaddressed to SEBI as well as to Reserve Bank of India (RBI)and sent to the following address within 10 to 12 days of receipt
of application.
Address for applicationThe Division Chief FII DivisionSecurities and Exchange Board of India,
The applicant is required to have the permission under theprovisions of the Foreign Exchange Management Act, 1999from the Reserve Bank of India.
Applicant must be legally permitted to invest in securitiesoutside the country or its in-corporation / establishment.
The applicant must be a "fit and proper" person.
The applicant has to appoint a local custodian and enter into anagreement with the custodian. Besides it also has to appoint adesignated bank to route its transactions.
Current financial instruments are available for FII investments
Securities in primary and secondary marketsincluding shares, debentures and warrants of companies, unlisted, listed or to be listed on arecognized stock exchange in India;
Units of mutual funds; Dated Government Securities;
Derivatives traded on a recognized stockexchange ; Commercial papers
In the past four years there has been more than $41trillion worth of FII funds invested in India.
This has been one of the major reasons on the bullmarket witnessing unprecedented growth with the
BSE Sensex rising 221% in absolute terms in thisspan.
The present downfall of the market too is influencedas these FIIs are taking out some of their investedmoney.
For long-term value investors, there¶s little becausefor worry but short term traders are adversely gettingaffected by the role of FIIs are playing at the present.
The degree of volatility can be attributed to thefollowing reasons:
The increase in investment by FIIs increases stockindices the stock prices and encourages further
investment . In this event when any correction takesplace the stock prices decline and there will be pullout by the FIIs in a large numbers as earning per share declines
The FIIs manipulate the situation of boom in such amanner that they wait till the index rises up to acertain height and exit at an appropriate time. Thistendency increases the volatility further
Where FDI is a bit of a permanent nature, FII fliesaway at the shortest political or economicaldisturbance
Entry and Exit is relatively very easy for an FII ascompared to FDI. Entry difficult for FDI because of infrastructure problems. Exit more difficult because of archaic labor laws
have been blamed for exacerbating small economic
problems in a country by making large and concertedwithdrawals at the first sign of economic weakness.
FDI is more desirable than portfolioinvestment because the investments thereunder are made directly in the capital of the
company and not in the secondary market FDI helps in increasing production and
employment , FII does not affect productionand employment .
FII investment is frequently referred to asFII investment is frequently referred to as hot hot money money for the reason that it can leave thefor the reason that it can leave thecountry at the same speed at which it comescountry at the same speed at which it comesin, in case of FDI it does¶ntin, in case of FDI it does¶nt