participatory notes This is a topic that many people are looking for. thetruthaboutdow.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, thetruthaboutdow.org would like to introduce to you Foreign Portfolio Investor & Participatory Notes (P-Notes). Following along are instructions in the video below:
“Is going to help all the viewers understand about this term called foreign portfolio investor investor foreign portfolio investor as a term is is be is very prevalent these days least since the last two months that have been observing relating to stocks like tubulin food or food. Works. Axis bank titan industry. Where where these stocks are are very volatile based on something to do with foreign portfolio investor.
So i thought why not throw some light on what s a foreign portfolio investor in india. Because as far as i understand currently a lot of people viewing. This video in terms of india are only relevant about two sources of foreign funds that come to india one is called an fyi and others call. It called an fdi so what s an fyi.
So we say an afi is nothing. But an investor who s sitting sitting in some foreign country. So an investor in some foreign country wants to invest in the indian stock market. So let s say nifty or sensex.
But he he invests in the indian stock market. Only with one view of making quick money with no time horizon as such which means that he feels that a stock. Which is at 100 rupees. Is undervalued.
He ll buy it at hundred rupees. And in in three months. Hence. If the stock becomes 120.
He ll sell it at 120 take the money and go away by making his profit. So zen fii and if i is nothing. But an investor who s sitting in some foreign country and invest in india. With an intention to make money and be a short term or long term trader who s an fdi and fdi is foreign direct investment.
This guy does not trade in the indian stock exchange like the fia does. But he invests money in a company and starts operating as a joint venture say for example icici prudential. Now. What is icici.
Prudential icici. Is an indian company. Prudential is a foreign investor and fdi. So prudential gave money to i see i say i see i see i gave some stocks to prudential now prudential and icici jointly operate business operations in india and the intention of ice intention of prudential is not actually to make some quick money on the shares and mod.
But to run an entire business in association with icici..
So when fii is basically looking at making money quick. These guys are looking at filling a brand over a period of time and cashing out at a very high valuation over a period of time if at all they want to move out fi money is called hot money in india is because it comes in whenever. They think they can make a lot of money and moves out very quickly when there is no money made in the market. But these guys once invest in fdi.
They kind of stick with the business operations for a long term and their intention is capital appreciation and dividend through the business now fii fdi. Very common term. But is it easy for you to become an na n. Fdi or n.
Fi. If you want to invest in india. Not so. Easy.
So not everyone can become an nf n. Fii is because first you ve got to go to sebi register with sabina seb is not going to give you registration. So easily so you have to show them a lot of things first is you need to have minimum one year of operational background that you can show that you ve been operating for a year and doing it well there are few net worth requirements that you have to take care of after having satisfied this particular thing. There is a very stringent strict kyc norm that you ve got to go through k.
Yc is no your client. No your customer. Where say b. Exactly wants to know where you getting the money from and a lot of other things they want to completely know you before they allow you to license.
They are love you to kind of operate as an fyi in india after all this is done you still every three or how to keep paying. Something called as ssv to see me to operate as an fyi in india. So basically not everyone is capable or rather. Not everyone wants to operate as in nfi in india.
So what if you re a small retail investor in us. Now. How will you invest in the indian indian market so what happens is till late what used to happen is all these retail investors will go to fi eyes and open. Something.
Called as a sub account. Now. What s a sub account. Sub account.
Is is like your broking account that you open with the brokers..
So you might want to trade. The indian stock market. So you approach a 6e matta and open a broking account with icici method. Which is a sub rockin account.
Basically. Okay. So similarly. A retail investor opens.
A sub broking account. Or rather a sub account. Within. Fii.
So the retail investor gives money to fi and fii on behalf of the retail investor would invest in a indian market. So say for example as a as a sub account as a sub account. You give one rupee to the fii fii total has 10 rupees of investment. The fi.
I will buy stocks in the indian market worth 10. Rupees. Once the stocks are bought by the fii worth 10. Rupees.
The fii will issue something called as p. Notes or promissory notes. Worth 1. Rupee to the sub account holder.
Which is you saying that i have on behalf of you pot stocks in the indian market. Keep this p. Naught or a promissory note guaranteeing that i bought it on behalf of you ok similarly. Even if i m a big investor and i can take care of all the requirements that the semi has i still don t want to become an fi.
I because i don t want to go through the stringent kyc process help say we understand where am. I getting money from so. All those bigger accounts also start operating as a sub account of fi ice. Now typically.
What happens is if i start investing money in the market..
But can fi is invest as much money as they want to invest in the indian markets or in the stocks now what happens is suppose let s talk about access back example. Okay. Now how much how much of axis bank. Can this fi buy.
It s an example please do not go on the numbers. They may not be strictly correct. But this is just an example so if an fi wants to buy shares in axis bank. How much can he buy an individual fi i1 fi.
I in itself cannot buy more than 10 of the paid of capital of axis bank. But this 10 figure is correct okay all the fi is put together cannot buy more than 24 of the paid up capital of the stock of this 24. Is also correct. So this is how currently the fi.
I have been investing and trading in the indian market. But what happened in 2008 was in 2008. When india was going through crisis and we and we were desperately looking out for foreigners to invest in the country semmy thought of various methods by which they would you know kind of attract a lot of more foreigners to come in put money in the country is whether they introduced something new call it as a qualified foreign investor. Now who s this qualified foreign investor.
Qualified foreign investor is this sub account. All the bigs are big or small people who did not want to go through as an fyi those guys start to encourage those guys to start investing in india. They introduce something new which is called as a qualified foreign investor. So who s a qualified foreign investor a qualified foreign investor is someone who can direct invest in the indian market and does not need to be registered as an fia all that he she needs is should fill up the kyc procedure and should have an indian depository participant.
Where all the shares that he she is bought can be kept. If you take care of these two things you can directly start investing in the indian market and these qualified foreign investors were given five percent. More were given five percent more to buy off all the stocks in our example axis bank over and above the ten percent of the fii so in individual fii kept by ten percent and an individual qualified foreign investor key by another five percent in the company in total fi is all fi is put together again by 24 of the total paid off of the company. But these twenty four percent for the fi plus ten percent.
More was allocated to qualified foreign investors to buy so how much can one individual buy in the company fifteen percent maximum. So ten percent you can buy acting as an fii and five percent he can buy acting as a qualified foreign investor and how much in total can all the foreigners put together by twenty four percent as an fi and ten percent as a qualified foreign investor cannot buy more than thirty four percent of the company. So currently the fia limit currently the fii limit in all the stocks is twenty four percent. But in a psu bank.
The fi s. Cannot buy more than ten percent. Sorry cannot buy more than twenty percent. So now what started happening is fi eyes went through stringent process.
They had to pay ss fee..
Where is the qualified foreign investors had to do nothing as such so there was a dichotomy in the market that bore the foreign investors investing in the market. But why our rules are different for them which is where sebby introduced something called as a foreign portfolio investor what exactly is a foreign portfolio investor foreign portfolio investor is nothing but all the fi eyes and qf eyes were put together under a new name called fbi. So now fi eyes. Also are a part of fbi and qf is are also part of fbi.
So in fbi. You don t have to be any ss fee to say be all that you need to make sure office. You have a depository participant and your kyc is clear you start acting as an fbi and don t pay any fees to seve okay now what if in axis bank. The limit of twenty four percent plus ten thirty four percent is taken care of and you want to invest more so what do you do can foreigners not at all invest over thirty four percent yes they can all that has to be done is act.
The border taxes bank. Should send a request to cb and rbi and once rbi approves. Once rbi approves. The limits are raised for more foreigners to invest in axis bank.
Stock. Over and above the limits given now how much can the limit go up limit can go up only up to the sectoral cap. So say for example let s talk about bharti airtel. Now bharti airtel currently might have a limit of twenty four percent of foreigners buying steak into power theatres.
But if bharti airtel sends a request to our way and rbi approves. The next limit on par theatre stock will be forty nine percent. Because telecom sector as a sector has a limit of forty nine percent of investments by the foreigners. So this twenty four percent can go as high as forty nine percent.
If rbi approves. The proposal for raising the funds raising the cap so what s a foreign portfolio. A foreign portfolio investor is nothing. But a basket where all the fi is and qualified foreign institutions were investors were bought together to make things very simple.
Where everything else was real mood. Except the kyc procedure. Which was kept constant and was very strict and they need to have a depository participant. Hope.
The concept is very clear simple enough for you to understand do subscribe for our channel ambition learning solution. There are a lot of such other videos that we ve uploaded would love to hear your comments hit like if you actually liked it to share our video with your friends. ” ..
Thank you for watching all the articles on the topic Foreign Portfolio Investor & Participatory Notes (P-Notes). All shares of thetruthaboutdow.org are very good. We hope you are satisfied with the article. For any questions, please leave a comment below. Hopefully you guys support our website even more.