UNIT 3
• Foreign investment is when a domestic investor decides to purchase
ownership of an asset in a foreign country.
• It involves cash flows moving from one country to another to execute
the transaction
Types of Foreign Investment
• Foreign Direct Investment
• Foreign Portfolio Investment
Foreign Direct Investment
Foreign Direct Investment is any form of investment that earns interest in
enterprises which function outside of the domestic territory of the investor. FDI
would be a direct investment by a corporation in a commercial venture in
another country.
A key to separating, this action from involvement in other ventures in a foreign
country is that the business enterprise operates completely outside the
economy of the corporation's home country.
Foreign direct investment (FDI) refers to an investment in or the acquisition of
foreign assets with the intent to control and manage them. Companies can
make an FDI in several ways, including purchasing the assets of a foreign
company; investing in the company or in new property, plants, or equipment;
or participating in a joint venture with a foreign company, which typically
involves an investment of capital or know-how.
FDI is primarily a long-term strategy. Companies usually expect to benefit
through access to local markets and resources, often in exchange for
expertise, technical know-how, and capital. A country’s FDI can be both
inward and outward. As the terms would suggest, inward FDI refers to
investments coming into the country and outward FDI are investments made
by companies from that country into foreign companies in other countries. The
difference between inward and outward is called the net FDI inflow, which can
be either positive or negative.
• Refer to investment in a foreign country where the investor retains
control over the investment.
• It typically takes the form of starting as subsidiary, acquiring a existing
firm or starting a joint venture in the foreign country.
, Portfolio Investment
FIIS
Foreign Institutional Investments (FII) pertain to investments that can be done
collectively in foreign assets. Institutional investors, like mutual funds, hedge
funds, banks, and insurance providers, fall under this category. To invest, FIIs
must register with the securities exchange board of the respective country.
The presence of FIIs significantly impacts a nation’s economy. When foreign
businesses invest in or divest from securities, it influences market trends. This
causes an upward swing when investments are made and vice versa when
withdrawals occur.
Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and
Persons of Indian Origin (PIOs) are allowed to invest in the primary and
secondary capital markets in India through the portfolio investment scheme
(PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian
companies through the stock exchanges in India.
The ceiling for overall investment for FIIs is 24 per cent of the paid up capital
of the Indian company and 10 per cent for NRIs/PIOs. The limit is 20 per cent
of the paid up capital in the case of public sector banks, including the State
Bank of India.
The ceiling of 24 per cent for FII investment can be raised up to sectoral
cap/statutory ceiling, subject to the approval of the board and the general
body of the company passing a special resolution to that effect. And the
ceiling of 10 per cent for NRIs/PIOs can be raised to 24 per cent subject to the
approval of the general body of the company passing a resolution to that
effect.
• Foreign investment is when a domestic investor decides to purchase
ownership of an asset in a foreign country.
• It involves cash flows moving from one country to another to execute
the transaction
Types of Foreign Investment
• Foreign Direct Investment
• Foreign Portfolio Investment
Foreign Direct Investment
Foreign Direct Investment is any form of investment that earns interest in
enterprises which function outside of the domestic territory of the investor. FDI
would be a direct investment by a corporation in a commercial venture in
another country.
A key to separating, this action from involvement in other ventures in a foreign
country is that the business enterprise operates completely outside the
economy of the corporation's home country.
Foreign direct investment (FDI) refers to an investment in or the acquisition of
foreign assets with the intent to control and manage them. Companies can
make an FDI in several ways, including purchasing the assets of a foreign
company; investing in the company or in new property, plants, or equipment;
or participating in a joint venture with a foreign company, which typically
involves an investment of capital or know-how.
FDI is primarily a long-term strategy. Companies usually expect to benefit
through access to local markets and resources, often in exchange for
expertise, technical know-how, and capital. A country’s FDI can be both
inward and outward. As the terms would suggest, inward FDI refers to
investments coming into the country and outward FDI are investments made
by companies from that country into foreign companies in other countries. The
difference between inward and outward is called the net FDI inflow, which can
be either positive or negative.
• Refer to investment in a foreign country where the investor retains
control over the investment.
• It typically takes the form of starting as subsidiary, acquiring a existing
firm or starting a joint venture in the foreign country.
, Portfolio Investment
FIIS
Foreign Institutional Investments (FII) pertain to investments that can be done
collectively in foreign assets. Institutional investors, like mutual funds, hedge
funds, banks, and insurance providers, fall under this category. To invest, FIIs
must register with the securities exchange board of the respective country.
The presence of FIIs significantly impacts a nation’s economy. When foreign
businesses invest in or divest from securities, it influences market trends. This
causes an upward swing when investments are made and vice versa when
withdrawals occur.
Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and
Persons of Indian Origin (PIOs) are allowed to invest in the primary and
secondary capital markets in India through the portfolio investment scheme
(PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian
companies through the stock exchanges in India.
The ceiling for overall investment for FIIs is 24 per cent of the paid up capital
of the Indian company and 10 per cent for NRIs/PIOs. The limit is 20 per cent
of the paid up capital in the case of public sector banks, including the State
Bank of India.
The ceiling of 24 per cent for FII investment can be raised up to sectoral
cap/statutory ceiling, subject to the approval of the board and the general
body of the company passing a special resolution to that effect. And the
ceiling of 10 per cent for NRIs/PIOs can be raised to 24 per cent subject to the
approval of the general body of the company passing a resolution to that
effect.
