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INTRODUCTION Foreign direct investment is that investment, which is made to serve the business interests of the investor in a company, which is in a different nation distinct from the investor's country of origin. A parent business enterprise and its foreign affiliate are the two sides of the FDI relationship. Together they comprise an MNC.

The parent enterprise through its foreign direct investment effort seeks to exercise substantial control over the foreign affiliate company. 'Control' as defined by the UN, is ownership of greater than or equal to 10% of ordinary shares or access to voting rights in an incorporated firm. For an unincorporated firm one needs to consider an equivalent criterion. Ownership share amounting to less than that stated above is termed as portfolio investment and is not categorized as FDI.

FDI stands for Foreign Direct Investment, a component of a country's national financial accounts. Foreign direct investment is investment of foreign assets into domestic structures, equipment, and organizations. It does not include foreign investment into the stock markets. Foreign direct investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.

FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. FDIs require a business relationship between a parent company and its foreign subsidiary. Foreign direct business relationships give rise to multinational corporations. For an investment to be regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting power in a business enterprise operating in a foreign country.

NEED FOR THE STUDY

When our then P.M Mr. Chandrasekhar announced about his plans to allow FDI in India, it opened a Pandora's Box for us.it was then in 1991. Since then, our economy has been growing manifolds. FDI enables to bring foreign investment in India as a result of which, our country can be benefitted in many ways; namely-employment opportunities, better quality of life, better products, better education and higher per capita income. Since 1991, our economy is growing so rapidly that all the so called 'super powers" are keen on building strong relationship with our country. India was a country rich in resources, but the problem was their optimum utilization. FDI has solved this problem.as a result, all the retail biggies are attracted towards India. India is giving tough competition to all developed countries, including china. This study is for analyzing the situation when our economy would be one of the strongest in the world. This study will help in findings the role of FDI in India

OBJECTIVES OF THE STUDY

1. To study about the concept of foreign direct investment (FDI) 2. To evaluate the role of FDI in Indian economy 3. To investigate the main motive of FDI 4. To analyze the advantages and disadvantages of FDI 5. To recommend the Indian government whether FDI is better or not IMPORTANCE OF THE STUDY This study on FDI is important because, FDI offers the following advantages to the Indian economy: Integration into global economy - Developing countries, which invite FDI, can gain access to a wider global and better platform in the world economy.

Economic growth - This is one of the major sectors, which is enormously benefited from
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foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country. Trade - Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country. Technology diffusion and knowledge transfer FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. Developing countries by inviting FDI can introduce world-class technology and technical expertise and processes to their existing working process. Foreign expertise can be an important factor in upgrading the existing technical processes. For example, the civilian nuclear deal led to transfer of nuclear energy know-how between the USA and India. Increased competition - FDI increases the level of competition in the host country. Other companies will also have to improve on their processes and services in order to stay in the market. FDI enhanced the quality of products, services and regulates a particular sector. Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

Human Resources Development - Employees of the country which is open to FDI get acquaint with globally valued skills.

Employment - FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India. SCOPE OF THE STUDY This study is based on the study of the concept of foreign direct investment (FDI). Here the researcher is intended to evaluate the role of FDI in Indian economy as well as will try to investigate the main motive of FDI in India by others and in international markets by Indian
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companies. This study will also include the analysis of advantages and disadvantages of FDI and finally the researcher will recommend the Indian government whether FDI is better or not. Here ATS Pvt. Ltd helped in completing the study on FDI. RESEARCH METHODOLOGY OF THE STUDY The study is based on secondary data and primary data up to some extent. The collected data is tabulated and considering the data has made suitable considering the data collected through secondary data annual reports has made interpretation, manuals, purchase registers, storage records of the organization. The main sources of information is from economic reports and statistical reports on Indian economy provided by Aditya Trading Solutions Ltd of the years 2011-2012, rest of the information collected from the brochures of the company and the companys website. . SOURCES OF INFORMATION

The data required for the study has been collected from both primary and secondary sources. The primary sources are Annual Reports, Brochures, and it also includes the company profile and the personal interview with the proprietor of the company. The secondary sources available were books of various authors and websites of relevant topic. LIMITATIONS OF THE STUDY: The study has the following limitations: 1. The study is limited only for a period

2. There may be approximations in calculating shares prices and the figures from the annual reports.

3. The study is purely based on data provided by the company.

INTRODUCTION It is well known that the growth of multinational enterprise (MNE) activity in the form of foreign direct investment (FDI) has grown at a faster rate than most other international transactions, particularly trade flows between countries. In many ways, MNEs are the control centers for a large portion of international transactions other than FDI. For example, almost half of trade flows are intrafirm; i.e., trade within a MNE.1 These real-world trends have led to substantial recent interest by the international economics literature to empirically investigate the fundamental factors that drive FDI behavior. This paper provides a critical review of this literature with a discussion of future research areas. The literature is large enough that a comprehensive review is not possible. Instead this paper highlights what the author considers the more important and novel papers in the empirical literature on the determinants of FDI. The topic of the effects of MNE activity on host and home countries will not be addressed, but could easily be the focus of its own literature survey. On final note, this surveys focus will be more recent papers, and the interested reader should refer to Caves (1996) for a broader discussion of earlier papers in the literature. To organize ideas, we first examine the literature that motivates and tests its analysis off determinants from a partial equilibrium view of the MNE. After briefly discussing the internal firm-specific factors that motivate a firm to become an MNE in the first place, we then examine the external factors that are likely determinants of the location and magnitude of FDI byMNEs. These external factors range from exchange rates and taxes, to factors that are likely more endogenous with FDI activity, such as trade protection and trade flows. These latterdeterminants of FDI, such as trade flows, opens up the larger issue of the quite varying motivations for FDI which are ignored to a large degree by the partial equilibrium literatures on the effects of exchange. the effects of exchange rates and taxes. Such questions are key in the literature reviewed in the second half of the paper the recent work to develop the theory and estimation of general equilibrium models of MNE behavior. FIRM CHARACTERISTICS THAT AFFECT THE MNE DECISION.

The most fundamental question about FDI activity is why a firm would choose to service foreign market through affiliate production, rather than other options such as exporting or licensing arrangements. The standard answer revolves around the presence of intangible assets specific to the firm, such as technologies, managerial skills, etc. Such assets are public goods within a firm to the extent that using such assets in one plant does not diminish use of the asset in other plants. This explains why firms with such assets are more likely to have multiple plants, ceteris paribus, but not necessarily why they would be multinational. To explain why such assets lead to an MNE decision, we often note the potential for market failure connected with these assets. A standard hypothesis is that it is difficult to fully appropriate rents from such assets through an arrangement with an external party. For example, a licensee will not offer full value in negotiations over a contract if the intangible asset is not fully revealed, but the licensor will not want to reveal the asset fully until a contract is finalized. In such situations, the optimal decision may be for the firm to internalize the market transaction, which would mean establishing its own production affiliate in the market. Early conceptualization of this notion includes Oliver Williamsons work on transactions costs, and the development of the ownership location-internalization (OLI) paradigm (e.g., see Rugman, 1980, and Dunning, 2001).Recent work has applied more formal theory of the firm, such as hold-up issues and agency theory, to1 For example, Census (2001) finds that 47% of the U.S.s trade with other countries was intrafirm in 1999.provide more formal frameworks for understanding market failures that lead to a firm becoming an MNE (e.g., see chapter 5 of Navaretti and Venables, 2004, for an overview).Testing these hypotheses is difficult because the firm-specific factors leading to the FDIdecision are inherently unobservable. As a result, R&D intensity (the ratio of research and development expenditures to assets or sales) and advertising intensity have been primarily used as proxies for the presence of intangible assets and then used as explanatory variables in firmlevelstudies of whether firms are multinational or not. In fact, it has become standard to include such variables in any firm-level analysis of the FDI decision. My own experience and reading of the literature suggests that R&D intensity is almost invariably positively correlated with multinationality regardless of the data sample, while the evidence for advertising intensity is much more mixed.

An alternative test is provided by Morck and Yeung (1992) which found that publicly-traded U.S. firms announcing foreign acquisitions experienced positive abnormal returns to their stock only if they had a significant level of R&D and advertising intensity. In the final analysis, however, it is not possible to suggest that these empirical analyses irrefutably confirm the internalization hypothesis. Such measures as R&D and advertising intensity may be proxying for other forces that lead to FDI, rather than those connected with the internalization In the rest of this literature review the focus is much more on the exogenous and policy factors that affect the magnitude of FDI that we observe, not whether FDI will occur or not in the first place. Industry and country-level studies of partial equilibrium specifications either ignore such micro-level factors or assume they are controlled for though an average industry- or country-level fixed effect. The general equilibrium work on the other hand models it directly, but then ties it back to country-level features (primarily country endowments) to again generate a country-level average effect. For example, FDI is more likely to originate in countries abundant in capital and skilledlabor which are necessary for generating the firm-specific assets that create e need to internalize through FDI. Partial Equilibrium Analysis of External Factors Affecting FDI Decisions and Location. A large body of literature examining determinants of FDI begins with a partial equilibrium firm-level framework based in industrial organization and finance to motivate empirical analysis. These studies then typically examine how exogenous macroeconomic factors affect the firms FDI decision, with the primary focus on exchange rate movements, taxes, and to a more limited extent, tariffs. Earlier studies often then use industry-level (or even country level)data to explore these hypotheses, while more recent work has had firm- and plant-level data available to more appropriately match the firm-level theory. Exchange Rate Effects The effect of exchange rates on FDI has been examined both with respect to changes in the bilateral level of the exchange rate between countries and in the volatility of exchange rates. The export market and the extent to which this affects the relationship-specificity between the multinational firm and the Chinese factories. Until Froot and Stein (1991), the common wisdom was that (expected) changes in the level of the exchange rate would not alter the decision by a firm to invest in a foreign country. In rough terms, while an appreciation of a firms home countrys currency would lower the cost of assets abroad, the (expected) nominal
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return goes down as well in the home currency, leaving the rate of return identical. Root and Stein (1991) presents an imperfect capital markets story for why a currency appreciation may actually increase foreign investment by a firm. Imperfect capital markets mean that the internal cost of capital is lower than borrowing from external sources. Thus, an appreciation of the currency leads to increased firm wealth and provides the firm with greater low-cost funds to invest relative to the counterpart firms in the foreign country that experience the devaluation of their currency. Froot and Stein (1991) provides empirical evidence of increased inward FDI with currency depreciation through simple regressions using a small number of annual US aggregate FDI observations, which Stevens (1998) finds is quite fragile to specification. Klein and Rosengren (1994), however, confirms that exchange rate depreciation increases US FDI using various samples of US FDI disaggregated by country source and type of FDI.Blonigen (1997) provides another way in which changes in the exchange rate level may affect inward FDI for a host country. If FDI by a firm is motivated by acquisition of assets that are transferable within a firm across many markets without a currency transaction (e.g., firm specific assets, such as technology, managerial skills, etc.), then an exchange rate appreciation of the foreign currency will lower the price of the asset in that foreign currency, but will not necessarily lower the nominal returns. In other words, a depreciation of a countrys currency may very well allow a fire sale of such transferable assets to foreign firms operating in global.3 McCulloch (1989, p. 188) provides a simple sketch of this argument The most profound effect has been seen in developing countries, where yearly foreign direct investment flows have increased from an average of less than $10 billion in the 1970s to a yearly average of less than $20 billion in the 1980s, to explode in the 1990s from $26.7billion in 1990 to $179 billion in 1998 and $208 billion in 1999 and now comprise a large portion of global FDI.. Driven by mergers and acquisitions and internationalization of production in a range of industries, FDI into developed countries last year rose to $636 billion, from $481 billion in 1998 (Source: UNCTAD) Proponents of foreign investment point out that the exchange of investment flows benefits both the home country (the country from which the investment originates) and the host country (the destination of the investment). Opponents of FDI note that multinational conglomerates are able

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to wield great power over smaller and weaker economies and can drive out much local competition. The truth lies somewhere in the middle. For small and medium sized companies, FDI represents an opportunity to become more actively involved in international business activities. In the past 15 years, the classic definition of FDI as noted above has changed considerably. This notion of a change in the classic definition,

however, must be kept in the proper context. Very clearly, over 2/3 of direct foreign investment is still made in the form of fixtures, machinery, equipment and buildings. Moreover, larger multinational corporations and conglomerates still make the overwhelming percentage of FDI. But, with the advent of the Internet, the increasing role of technology, loosening of direct investment restrictions in many markets and decreasing communication costs means that newer, non-traditional forms of investment will play an important role in the future. Many

governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact. In the United States, the Bureau of Economic Analysis, a section of the U.S. Department of Commerce, is responsible for collecting economic data about the economy including information about foreign direct investment flows. Monitoring this data is very helpful in trying to determine the impact of such investments on the overall economy, but is especially helpful in evaluating industry segments. State and local governments watch closely because they want to track their foreign investment attraction programs for successful outcomes. As mentioned above, the overwhelming majority of foreign direct investment is made in the form of fixtures, machinery, equipment and buildings. This investment is achieved or accomplished mostly via mergers & acquisitions. In the case of traditional manufacturing, this has been the primary mechanism for investment and it has been heretofore very efficient. Within the past decade, however, there has been a dramatic increase in the number of technology startups and this, together with the rise in prominence of Internet usage, has fostered increasing changes in foreign investment patterns. Many of these high tech startups are very small companies that have grown out of research & development projects often affiliated with major universities and with some government sponsorship. Unlike traditional manufacturers, many of these companies do not require huge manufacturing plants and immense warehouses to store inventory. Another factor to consider is the number of companies whose primary product is an
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intellectual property right such as a software program or a software-based technology or process. Companies such as these can be housed almost anywhere and therefore making a capital investment in them does not require huge outlays for fixtures, machinery and plants. In many cases, large companies still play a dominant role in investment activities in small, high tech oriented companies. However, unlike in the past, these larger companies are not necessarily acquiring smaller companies outright. There are several reasons for this, but the most important one is most likely the risk associated with such high tech ventures. In the case of mature industries, the products are well defined. The manufacturer usually wants to get closer to its foreign market or wants to circumvent some trade barrier by making a direct foreign investment. The major risk here is that you do not sell enough of the product that you manufactured. However, you have added additional capacity and in the case of multinational corporations this capacity can be used in a variety of ways. High tech ventures tend to have longer incubation periods. That is, the product tends to require significant development time. In the case of software and other intellectual property type products, the product is constantly changing even before it hits the marketplace. This makes the investment decision more complicated. When you invest in fixtures and machinery, you know what the real and book value of your investment will be. When you invest in a high tech venture, there is always an element of uncertainty. Unfortunately, the recent spate of dot.com failures is quite illustrative of this point. Therefore, the expanded role of technology and intellectual property has changed the foreign direct investment playing field. Companies are still motivated to make foreign investments, but because of the vagaries of technology investments, they are now finding new vehicles to accomplish their goals. Consider the following: LICENSING AND TECHNOLOGY TRANSFER. Licensing and tech transfer have been essential in promoting collaboration between the academic and business communities. Ever since legal hurdles were removed that allowed universities to hold title to research and development done in their labs, licensing agreements have helped turned raw technology into finished products that are viable in competitive marketplaces. With

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some help from a variety of government agencies in the form of grants for R&D as well as other financial assistance for such things as incubator programs, once timid college researchers are now stepping out and becoming cutting edge entrepreneurs. These strategic alliances have had a serious impact in several high tech industries, including but not limited to: medical and agricultural biotechnology, computer software engineering, telecommunications, advanced materials processing, ceramics, thin materials processing, photonics, digital multimedia production and publishing, optics and imaging and robotics and automation. Industry clusters are now growing up around the university labs where their derivative technologies were first discovered and nurtured. Licensing agreements allow companies to take full advantage of new and exciting technologies while limiting their overall risk to royalty payments until a particular technology is fully developed and thus ready to put new products into the manufacturing pipeline. RECIPROCAL DISTRIBUTION AGREEMENTS. Actually, this type of strategic alliance is more trade-based, but in a very real sense it does in fact represent a type of direct investment. Basically, two companies, usually within the same or affiliated industries, agree to act as a national distributor for each others products. The classical example is to be found in the furniture industry. A U.S.-based manufacturer of tables signs a reciprocal distribution agreement with a Spanish-based manufacturer of chairs. Both companies gain direct access to the others distribution network without having to pay distributor support payments and other related expenses found within the distribution channel and neither company can hurt the others market for its products. Without such an agreement in place, the Spanish manufacturer might very well have to invest in a national sales office to coordinate its distributor network, manage warehousing, inventory and shipping as well as to handle administrative tasks such as accounting, public relations and advertising. JOINT VENTURE AND OTHER HYBRID STRATEGIC ALLIANCES. The more traditional joint venture is bi-lateral, that is it involves two parties who are within the same industry who are partnering for some strategic advantage. Typical reasons might include a need for access to proprietary technology that might tip the competitive edge in another competitors favor, desire to gain access to intellectual capital in the form of ultra-expensive
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human resources, access to heretofore closed channels of distribution in key regions of the world. One very good reason why many joint ventures only involve two parties is the difficulty in integrating different corporate cultures. With two domestic companies from the same country, it would still be very difficult. However, with two companies from different cultures, it is almost impossible at times. This is probably why pure joint ventures have a fairly high failure rate only five years after inception. Joint ventures involving three or more parties are usually called syndicates and are most often formed for specific projects such as large construction or public works projects that might involve a wide variety of expertise and resources for successful completion. In some cases, syndicates are actually easier to manage because the project itself sets certain limits on each party and close cooperation is not always a prerequisite for ultimate success of the endeavor. PORTFOLIO INVESTMENT. Yes, we know that youre paying attention and no were not trying to trip you up here. Remember our definition of foreign direct investment as it pertains to controlling interest. For most of the latter part of the 20th century when FDI became an issue, a companys portfolio investments were not considered a direct investment if the amount of stock and/or capital was not enough to garner a significant voting interest amongst shareholders or owners. However, two or three companies with "soft" investments in another company could find some mutual interests and use their shareholder power effectively for management control. This is another form of strategic alliance, sometimes called "shadow alliances". So, while most company portfolio investments do not strictly qualify as a direct foreign investment, there are instances within a certain context that they are in fact a real direct investment.

FOREIGN DIRECT INVESTMENT IN INDIA These three letters stand for foreign direct investment. The simplest explanation of 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 corporations home country. The investing corporation must control 10 percent or more of the voting power of the new venture.

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According to history the United States was the leader in the FDI activity dating back as far as the end of World War II. Businesses from other nations have taken up the flag of FDI, including many who were not in a financial position to do so just a few years ago. The practice has grown significantly in the last couple of decades, to the point that FDI has generated quite a bit of opposition from groups such as labor unions. These organizations have expressed concern that investing at such a level in another country eliminates jobs. Legislation was introduced in the early 1970s that would have put an end to the tax incentives of FDI. But members of the Nixon administration, Congress and business interests rallied to make sure that this attack on their expansion plans was not successful. One key to understanding FDI is to get a mental picture of the global scale of corporations able to make such investment. A carefully planned FDI can provide a huge new market for the company, perhaps introducing products and services to an area where they have never been available. Not only that, but such an investment may also be more profitable if construction costs and labor costs are less in the host country. The definition of FDI originally meant that the investing corporation gained a significant number of shares (10 percent or more) of the new venture. In recent years, however, companies have been able to make a foreign direct investment that is actually long-term management control as opposed to direct investment in buildings and equipment. FDI growth has been a key factor in the international nature of business that many are familiar with in the 21st century. This growth has been facilitated by changes in regulations both in the originating country and in the country where the new installation is to be built. Corporations from some of the countries that lead the worlds economy have found fertile soil for FDI in nations where commercial development was limited, if it existed at all. The dollars invested in such developing-country projects increased 40 times over in less than 30 years. The financial strength of the investing corporations has sometimes meant failure for smaller competitors in the target country. One of the reasons is that foreign direct investment in buildings and equipment still accounts for a vast majority of FDI activity. Corporations from the originating country gain a significant financial foothold in the host country. Even with this factor, host countries may welcome FDI because of the positive impact it has on the smaller economy.

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Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Figure below shows net inflows of foreign direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, Western Europe and Japan).But flows to non-industrialized countries are increasing sharply. Foreign direct investment (FDI) refers to long term participation by country A into country B. It usually involves participation in management, joint-venture, transfer of

technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) .Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy (direct investor) in an entity resident in an economy other than that of the investor (direct investment enterprise).The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise. Direct investment involves both the initial transaction between the two entities and all subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated. Foreign Direct Investment when a firm invests directly in production or other facilities, over which it has effective control, in a foreign country. Manufacturing FDI requires the establishment of production facilities. Service FDI requires building service facilities or an investment foothold via capital contributions or building office facilities. Foreign subsidiaries overseas units or entities. Host country the country in which a foreign subsidiary operates. Flow of FDI the amount of FDI undertaken over a given time. Stock of FDI total accumulated value of foreign-owned assets. Outflows/Inflows of FDI the flow of FDI out of or into a country. Foreign Portfolio Investment the investment by individuals, firms, or public bodies in foreign financial instruments. Stocks, bonds, other forms of debt.

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Differs from FDI, which is the investment in physical assets. Portfolio theory the behavior of individuals or firms administering large financial assets.

amounts of

Product Life-Cycle Theory

Ray Vernon asserted that product moves to lower income countries as products move through their product life cycle. The FDI impact is similar: FDI flows to developed countries for innovation, and from developed countries as products evolve from being innovative to being mass-produced.

The Eclectic Paradigm Distinguishes between: Structural market failure external condition that gives rise to monopoly advantages as a result of entry barriers Transactional market failure failure of intermediate product markets to

transact goods and services at a lower cost than internationalization The Dynamic Capability Perspective A firms ability to diffuse, deploy, utilize and rebuild firm-specific resources for a competitive advantage. Ownership specific resources or knowledge are necessary but not sufficient for international investment or production success. It is necessary to effectively use and build dynamic capabilities for quantity and/or quality based deployment that is transferable to the multinational environment. Firms develop centers of excellence to concentrate core competencies to the host environment.

Monopolistic Advantage Theory An MNE has and/or creates monopolistic advantages that enable it to operate subsidiaries abroad more profitably than local competitors. Monopolistic Advantage comes from:
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Superior knowledge production technologies, managerial skills, industrial organization, knowledge of product. Economies of scale through horizontal or vertical FDI Internationalization Theory When external markets for supplies, production, or distribution fails to provide efficiency, companies can invest FDI to create their own supply, production, or distribution streams. Advantages Avoid search and negotiating costs Avoid costs of moral hazard (hidden detrimental action by external partners) Avoid cost of violated contracts and litigation Capture economies of interdependent activities Avoid government intervention Control supplies Control market outlets Better apply cross-subsidization, predatory pricing and transfer pricing

HISTORY In the years after the Second World War global FDI was dominated by the United States, as much of the world recovered from the destruction brought by the conflict. The US accounted for around three-quarters of new FDI (including reinvested profits) between 1945 and 1960. Since that time FDI has spread to become a truly global phenomenon, no longer the exclusive preserve of OECD countries. FDI has grown in importance in the global economy with FDI stocks now constituting over 20 percent of global GDP. Foreign direct investment (FDI) is a measure of foreign ownership of productive assets, such as factories, mines and land. Increasing foreign investment can be used as one measure of growing economic globalization. Figure below shows net inflows of foreign direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign investment occur between the industrialized countries (North America, Western

Europe and Japan). But flows to non-industrialized countries are increasing sharply.

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FOREIGN DIRECT INVESTOR A foreign direct investor is an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which has a direct investment enterprise that is, a subsidiary, associate or branch operating in a country other than the country or countries of residence of the foreign direct investor or investors.

TYPES OF FOREIGN DIRECT INVESTMENT: AN OVERVIEW

FDIs can be broadly classified into two types: 1 2 Outward FDIs Inward FDIs

This classification is based on the types of restrictions imposed, and the various prerequisites required for these investments. Outward FDI: An outward-bound FDI is backed by the government against all types of

associated risks. This form of FDI is subject to tax incentives as well as disincentives of various forms. Risk coverage provided to the domestic industries and subsidies granted to the local firms stand in the way of outward FDIs, which are also known as 'direct investments abroad.'

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Inward FDIs: Different economic factors encourage inward FDIs. These include interest loans, tax breaks, grants, subsidies, and the removal of restrictions and limitations. Factors detrimental to the growth of FDIs include necessities of differential performance and limitations related with ownership patterns. Other categorizations of FDI Other categorizations of FDI exist as well. Vertical Foreign Direct Investment takes place when a multinational corporation owns some shares of a foreign enterprise, which supplies input for it or uses the output produced by the MNC. Horizontal foreign direct investments happen when a multinational company carries out a similar business operation in different nations. Horizontal FDI the MNE enters a foreign country to produce the same products product at home. Conglomerate FDI the MNE produces products not manufactured at home. Vertical FDI the MNE produces intermediate goods either forward or backward in the supply stream. Liability of foreignness the costs of doing business abroad resulting in a competitive disadvantage. METHODS OF FOREIGN DIRECT INVESTMENTS The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through any of the following methods:

by incorporating a wholly owned subsidiary or company by acquiring shares in an associated enterprise through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor or enterprise Foreign direct investment incentives may take the following forms: low corporate tax and income tax rates

tax holidays
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other types of tax concessions preferential tariffs special economic zones investment financial subsidies soft loan or loan guarantees free land or land subsidies relocation & expatriation subsidies job training & employment subsidies infrastructure subsidies R&D support derogation from regulations (usually for very large projects) ENTRY MODE The manner in which a firm chooses to enter a foreign market through FDI. International franchising Branches Contractual alliances Equity joint ventures Wholly foreign-owned subsidiaries Investment approaches: Greenfield investment (building a new facility) Cross-border mergers Cross-border acquisitions Sharing existing facilities

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WHY IS FDI IMPORTANT FOR ANY CONSIDERATION OF GOING GLOBAL? The simple answer is that making a direct foreign investment allows several tasks: 1 .Avoiding foreign government pressure for local production. 2. Circumventing trade barriers, hidden and otherwise. 3. Making the move from domestic export sales to a locally-based national sales office. 4. Capability to increase total production capacity. 5.Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc; companies to accomplish

A more complete response might address the issue of global business partnering in very general terms. While it is nice that many business writers like the expression, think globally, act locally, this often used clich does not really mean very much to the average business executive in a small and medium sized company. The phrase does have significant connotations for multinational corporations. But for executives in SMEs, it is still just another buzzword. The simple explanation for this is the difference in perspective between executives of multinational corporations and small and medium sized companies. Multinational corporations are almost always concerned with worldwide manufacturing capacity and proximity to major markets. Small and medium sized companies tend to be more concerned with selling their products in overseas markets. The advent of the Internet has ushered in a new and very different mindset that tends to focus more on access issues. SMEs in particular are now focusing on access to markets, access to expertise and most of all access to technology. THE STRATEGIC LOGIC BEHIND FDI Resources seeking looking for resources at a lower real cost. Market seeking secure market share and sales growth in target foreign market.

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Efficiency seeking seeks to establish efficient structure through useful factors, cultures, policies, or markets.

Strategic asset seeking seeks to acquire assets in foreign firms that promote corporate long term objectives.

Enhancing Efficiency from Location Advantages Location advantages - defined as the benefits arising from a host countrys comparative advantages.- Better access to resources Lower real cost from operating in a host country Labor cost differentials Transportation costs, tariff and non-tariff barriers Governmental policies

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Improving Performance from Structural Discrepancies Structural discrepancies are the differences in industry structure attributes between home and host countries. Examples include areas where:

Competition is less intense Products are in different stages of their life cycle Market demand is unsaturated There are differences in market sophistication

Increasing Return from Ownership Advantages Ownership Advantages come from the application of proprietary tangible and intangible assets in the host country. Reputation, brand image, distribution channels Technological expertise, organizational skills, experience Core competence skills within the firm that competitors cannot easily imitate or match. Ensuring Growth from Organizational Learning MNEs exposed to multiple stimuli, developing: Diversity capabilities Broader learning opportunities Exposed to: New markets New practices New ideas New cultures
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New competition

THE IMPACT OF FDI ON THE HOST COUNTRY Employment Firms attempt to capitalize on abundant and inexpensive labor. Host countries seek to have firms develop labor skills and sophistication. Host countries often feel like least desirable jobs are transplanted from home countries. Home countries often face the loss of employment as jobs move.

FDI Impact on Domestic Enterprises Foreign invested companies are likely more productive than local competitors. The result is uneven competition in the short run, and competency building efforts in the longer term. It is likely that FDI developed enterprises will gradually develop local supporting industries, supplier relationships in the host country. IMPACT OF FOREIGN DIRECT INVESTMENT ON INDIAN ECONOMY The economy of India is the third largest in the world as measured by purchasing power parity (PPP), with a gross domestic product (GDP) of US $3.611 trillion. When measured in USD exchange-rate terms, it is the tenth largest in the world, with a GDP of US $800.8 billion (2006). Is the second fastest growing major economy in the world, with a GDP growth rate of 8.9% at the end of the first quarter of 2006-2007. However, India's huge population results in a per capita income of $3,300 at PPP and $714 at nominal. The economy is diverse and encompasses agriculture, handicrafts, textile, manufacturing, and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and are playing an
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increasingly important role of India's economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global companies for the outsourcing of their customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. The privatization of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate. India faces a burgeoning population and the challenge of reducing economic and social inequality. Poverty remains a serious problem, although it has declined significantly since independence, mainly due to the green revolution and economic reforms. FDI up to 100% is allowed under the automatic route in all activities/sectors except the following which will require approval of the Government: Activities/items that require an Industrial License; Proposals in which the foreign collaborator has a previous/existing venture/tie up in India FDI in India includes, FDI inflows as well as FDI outflow from India. Also FDI foreign direct investment and FII foreign institutional investors are a separate case study while preparing a report on FDI and economic growth in India. FDI and FII in India have registered growth in terms of both FDI flows in India and outflow from India. The FDI statistics and data are evident of the emergence of India as both a potential investment market and investing country. FDI has helped the Indian economy grow, and the government continues to encourage more investments of this sort - but with $5.3 billion in FDI. India gets less than 10% of the FDI of China. Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has - in a lot of ways - enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that may have needed economic attention, and address the various problems that continue to challenge the country. India has continually sought to attract FDI from the worlds major investors.
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In 1998 and 1999, the Indian national government announced a number of reforms designed to encourage FDI and present a favorable scenario for investors. FDI investments are permitted through financial collaborations, through private equity or preferential allotments, by way of capital markets through Euro issues, and in joint ventures. FDI is not permitted in the arms, nuclear, railway, coal & lignite or mining industries. A number of projects have been announced in areas such as electricity generation, distribution and transmission, as well as the development of roads and highways, with opportunities for foreign investors. The Indian national government also provided permission to FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately $352.5m. Currently, FDI is allowed in financial services, including the growing credit card business. These services include the non-banking financial services sector. Foreign investors can buy up to 40% of the equity in private banks, although there is condition that stipulates that these banks must be multilateral financial organizations. Up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sector can also be purchased. By 2004, India received $5.3 billion in FDI, big growth compared to previous years, but less than 10% of the $60.6 billion that flowed into China. Why does India, with a stable democracy and a smoother approval process, lag so far behind China in FDI amounts? Although the Chinese approval process is complex, it includes both national and regional approval in the same process. Federal democracy is perversely an impediment for India. Local authorities are not part of the approvals process and have their own rights, and this often leads to projects getting bogged down in red tape and bureaucracy. India actually receives less than half the FDI that the federal government approves. INVESTMENT RISKS IN INDIA Sovereign Risk India is an effervescent parliamentary democracy since its political freedom from British rule more than 50 years ago. The country does not face any real threat of a serious revolutionary movement which might lead to a collapse of state machinery. Sovereign risk in India is hence nil for both "foreign direct investment" and "foreign portfolio investment." Many Industrial and
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Business houses have restrained themselves from investing in the North-Eastern part of the country due to unstable conditions. Nonetheless investing in these parts is lucrative due to the rich mineral reserves here and high level of literacy. Kashmir on the northern tip is a militancy affected area and hence investment in the state of Kashmir are restricted by law. Political Risk India has enjoyed successive years of elected representative government at the Union as well as federal level. India suffered political instability for a few years in the sense there was no single party which won clear majority and hence it led to the formation of coalition governments. However, political stability has firmly returned since the general elections in 1999, with strong and healthy coalition governments emerging. Nonetheless, political instability did not change India's bright economic course though it delayed certain decisions relating to the economy. Economic liberalization which mostly interested foreign investors has been accepted as essential by all political parties including the Communist Party of India though there are bleak chances of political instability in the future, even if such a situation arises the economic policy of India would hardly be affected... Being a strong democratic nation the chances of an army coup or foreign dictatorship are minimal. Hence, political risk in India is practically absent. Commercial Risk Commercial risk exists in any business ventures of a country. Not each and every product or service is profitably accepted in the market. Hence it is advisable to study the demand / supply condition for a particular product or service before making any major investment. In India one can avail the facilities of a large number of market research firms in exchange for a professional fee to study the state of demand / supply for any product. As it is, entering the consumer market involves some kind of gamble and hence involves commercial risk Risk Due To Terrorism In the recent past, India has witnessed several terrorist attacks on its soil which could have a negative impact on investor confidence. Not only business environment and return on investment, but also the overall security conditions in a nation have an effect on FDI's. Though some of the financial experts think otherwise. They believe the negative impact of terrorist
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attacks would be a short term phenomenon. In the long run, it is the micro and macro economic conditions of the Indian economy that would decide the flow of Foreign investment and in this regard India would continue to be a favorable investment destination. FDI POLICY IN INDIA Foreign Direct Investment Policy FDI policy is reviewed on an ongoing basis and measures for its further liberalization are taken. Change in sectoral policy/sectoral equity cap is notified from time to time through Press Notes by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy announcement by SIA are subsequently notified by RBI under FEMA. All Press Notes are available at the website of Department of Industrial Policy & Promotion. FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors including the services sector under automatic route. FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI. The investors are required to notify the Regional office concerned of RBI of receipt of inward remittances within 30 days of such receipt and will have to file the required documents with that office within 30 days after issue of shares to foreign investors. The Foreign direct investment scheme and strategy depends on the respective FDI norms and policies in India. The FDI policy of India has imposed certain foreign direct investment regulations as per the FDI theory of the Government of India. These include FDI limits in India for example:
o

Foreign direct investment in India in infrastructure development projects excluding arms and ammunitions, atomic energy sector, railways system , extraction of coal and lignite and mining industry is allowed upto 100% equity participation with the capping amount as Rs. 1500 crores.

FDI figures in equity contribution in the finance sector cannot exceed more than 40% in banking services including credit card operations and in insurance sector only in joint ventures with local insurance companies.

FDI limit of maximum 49% in telecom industry especially in the GSM services

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GOVERNMENT APPROVALS FOR FOREIGN COMPANIES DOING BUSINESS IN INDIA Government Approvals for Foreign Companies Doing Business in India or Investment Routes for Investing in India, Entry Strategies for Foreign Investors India's foreign trade policy

has been formulated with a view to invite and encourage FDI in India. The Reserve Bank of India has prescribed the administrative and compliance aspects of FDI. A foreign company planning to set up business operations in India has the following options:

Investment under automatic route; and Investment through prior approval of Government.

Procedure under automatic route FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval either by the Government or RBI. The investors are only required to notify the Regional office concerned of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors. List of activities or items for which automatic route for foreign investment is not available, include the following:

Banking NBFC's Activities in Financial Services Sector Civil Aviation Petroleum Including Exploration/Refinery/Marketing Housing & Real Estate Development Sector for Investment from Persons other than NRIs/OCBs.

Venture Capital Fund and Venture Capital Company Investing Companies in Infrastructure & Service Sector Atomic Energy & Related Projects Defense and Strategic Industries Agriculture (Including Plantation) Print Media
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Broadcasting Postal Services

Procedure under Government approval FDI in activities not covered under the automatic route, requires prior Government approval and are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite proposals involving foreign investment/foreign technical collaboration are also granted on the recommendations of the FIPB. Application for all FDI cases, except Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance. Application for NRI and 100% EOU cases should be presented to SIA in Department of Industrial Policy & Promotion. Investment by way of Share Acquisition A foreign investing company is entitled to acquire the shares of an Indian company without obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines. If the acquisition of shares directly or indirectly results in the acquisition of a company listed on the stock exchange, it would require the approval of the Security Exchange Board of India. New investment by an existing collaborator in India A foreign investor with an existing venture or collaboration (technical and financial) with an Indian partner in particular field proposes to invest in another area, such type of additional investment is subject to a prior approval from the FIPB, wherein both the parties are required to participate to demonstrate that the new venture does not prejudice the old one. General Permission of RBI under FEMA Indian companies having foreign investment approval through FIPB route do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors. The companies are required to notify the concerned Regional office of the RBI of receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares to the foreign investors or NRIs. Participation by International Financial Institutions
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Equity participation by international financial institutions such as ADB, IFC, CDC, DEG, etc., in domestic companies is permitted through automatic route, subject to SEBI/RBI regulations and sector specific cap on FDI. FDI IN SMALL SCALE SECTOR (SSI) UNITS A small-scale unit cannot have more than 24 per cent equity in its paid up capital from any industrial undertaking, either foreign or domestic. If the equity from another company (including foreign equity) exceeds 24 per cent, even if the investment in plant and machinery in the unit does not exceed Rs 10 million, the unit loses its small-scale status and shall require an industrial license to manufacture items reserved for smallscale sector. See also FDI in Small Scale Sector in India Further Liberalized

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ADITYA TRADING SOLUTIONS (ATS) We are a full spectrum investment management house specializing in online commodity trading. We are one of the earliest members of MCX and pioneers of online commodity broking in TAMILNADU. ATS is promoted by young and dynamic entrepreneurs who have years of proven experience in international derivative markets like NYMEX and worked with several FORTUNE 500 companies. We are the largest online commodity Trading Company in Tamilnadu. Our client base consists of a long list of satisfied institutional and retail client base broking. Mission To provide cost effective Trading, Investment & Risk Management solutions to our ever increasing client base in a professional and ethical way. Services Trading & investment access to MCX, NCDEX, NSE, BSE & Currency futures Physical Delivery of commodities Price risk management & Hedging Wealth management with capital protection Research & investment advisory 24 X 7 online back office When you are a client of ATS you never have to worry about not knowing your account status. You can access your Trading/Accounts statement any time, anyplace at your with help of our 24 X 7 online back office software. Online Trading Platform We provide you online trading software to help you place your orders at the click of a button. We ensure that the entire process right from opening your account to placing an order online is as simple and hassle free as possible. Research Guidance We provide you with highly successful Trading/Investment calls to enhance your profitability.
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convenience

Our research will guide you in making informed decisions which will make your WEALTH GROW.

Research on your mobile Imagine how profitable you can be if critical research calls are available to you on time. We at ATS deliver trading calls to your mobile through SMS on time, every time. Personalized service We understand that each of our clients have unique set of trading requirements. We customize our service package to suit your trading needs PROMOTERS OF THE COMPANY Mr. Vikas Jain - ATS Founder Mr. Vikas Jain is Managing Director of Aditya Trading Solutions Private Limited (ATS) and started the business along with co-promoter, Mr. Sunish C V in 2003. Prior to this, Mr. Vikas Jain was the part of Asset Liability Management Team of Standard Chartered Bank. IN the year 2002 he was conferred the Best Performer Award for his outstanding performance in the development of Wholesale Banking by Standard Chartered Bank. Earlier, Mr. Vikas Jain worked as Risk Manager, in Chemoil Corp, which is the largest independent oil bunkering company in United States of America and was in charge of oil trading positions for various group companies in Chemoil Corp. Mr. Vikas Jain is part of many social service and charity programs and channels his contributions through the Rotary club of Madras Downtown. Mr. Vikas Jain is a post graduate in Business Management and holds Master in Finance from the Institute of Chartered Financial Analysts of India. Mr. Sunish C V - Director Mr. Sunish C V is the Co Founder and Director of Aditya Trading Solutions Private Limited (ATS). Sunish C V has a 10-year professional track in the field of investment banking, where he has had a challenging career across various regions and businesses. Excelling in all responsibilities handled, he has acquired functional expertise in Risk Management, Retail Broking, Asset Management and corporate planning. As the Manager of the Risk Mgmt Team in Chemoil Corp of USA, Sunish C V held a number of leadership roles, particularly in setting up
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Risk Management Policies and its implementation throughout various trading desks of Chemoil group across the world. Prior to this, Sunish C V, held various positions in Systematix Corporate. He was part of the team which leads the company from a one branch broking company to its present stature of one of the leading brokerage houses in India. Sunish C V is a member of the Institute of Chartered Financial Analysts of India. He also delivers guest lectures at National Institute of Technology, Trichy, and ICFAI Business School. Sunish C V graduated in Electronics and Communication Engineering, a Master of Business Administration from Regional College of Engineering, Trichy and is a Chartered Financial Analyst. Sunish C V is affiliated with certain non-profit organizations, including the Rotary Club. Mr. Suresh Kumar P - Vice President He is a Post graduate in Business administration (Marketing) from NIT Trichy, and a Bachelor of Engineering (Mechanical) from HCE Chennai. He had worked with Apex management consulting P ltd as a business consultant and had advised Murugappa group of companies, Godrej saralee ltd and Reynolds pens for Business process reengineering, ERP implementation and productivity improvement. Ms. Divya B - Financial Controller She is responsible for Operational development at ATS. She has done M.B.A (Finance) and associated with ATS since August 2004. She started her career with ATS as Accounts Assistant, later on appointed as Back Office Manager before assuming the role of Financial Controller. Mr. Manoharan - Business Leader Joined as a Dealer and promoted to Business Leader he has been awarded Best Branch Manager for 2009. He is the person who gives equal importance to hard work and smart work. He has over 5 years of industry experience He has a graduate in Corporate Secretary ship and currently pursuing Master of Business Administration - (Finance). Mr. V Sunil Kumar - Branch Manager Joined as a Dealer in ATS and was promoted to Branch Manager. He has even worked with Astron Technologies Pvt Ltd and has over 3 years of industry experience. He is a commerce graduate

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Mr. Lenish K - Risk Manager He is in employment with Aditya Trading Solutions Private Limited (ATS) for the past Four and Half years and showed a significance increase relationship between clients. PRODUCTS AND SERVICES EQUITY The section attempts to assist and guide our valuable investors in their decision making process with the thorough company-specific in-depth analysis. Based on the complete evaluation and study of the stocks, done by our highly experienced and efficient research and analytical team, the investors, with different risk appetites, may judge their past, present and likely future position in equity shares. The report covers various aspects like valuation, revenue projection, future financial position of the business, key ratios, trading comparables, market data, current positioning of the company and industry, key developments and other relevant details. To make the information reader friendly and simpler, it is also presented in tabular and graphical forms. Analysis of impact of any important business, economic or political development, on the revenues and margins is conduct to give a clear insight to the investors. Finally an investment call to BUY, SELL, HOLD, or ACCUMULATE is provided by the analyst. Besides, a similar approach is followed in offering industry reports as well. DERIVATIVES Derivatives are tools used to hedge position of an investor in a future position. However, in recent times, Futures and Options have also grabbed investors attention in view of their lucrative returns. A daily derivative report is provided in order to give an insight on the day-today F&O highlights, overview, pivot table, nifty put call ratio over the month, daily future open interest gainers & losers and recommendation. We also provide information on daily trading strategy in the F&O. IPO This includes the extensive coverage of the companies entering the capital market with their Initial Public Offers (IPO). Mostly, investors are unaware regarding the longevity of these companies operations and where will they stand in future. Our IPO report, which incorporates
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all the relevant information including future earnings forecast, growth and its current market performance, acts as a complete investment guide. Besides, our specialized team also ranks the IPO, in order to make the investment decision simpler.

MUTUAL FUND The section includes the daily updates in Mutual funds including New Fund Offers, Dividend declaration, buying and selling by Mutual funds in equity as well as in debt market. Besides, it also highlights the in-depth analysis on mutual funds, in which the news and developments, category wise top gainers and over all top gainers schemes, portfolio and scheme analysis of top three schemes are covered along with the updates on NFO and latest dividends. COMMODITIES A commodity, the only asset class that is negatively correlated to bonds is a powerful tool for diversification, and has developed into a new opportunity for investors to get heavy returns. With ATS, you can cash on the lucrative opportunity of investing in commodities or the raw materials used to create the products that people really need, demand for which is endless and ever increasing. Our report covers various aspects including Agricultural Commodities, Precious Metals, Base Metals, Energy segment, coupled with the analysis of impact of the global and domestic news. Finally an investment call to BUY, SELL, or HOLD, is provided by the analyst, and a similar approach is followed in offering industry reports as well. ANNOUNCEMENTS Daily corporate announcements made by the top companies in the BSE and NSE are covered throughout the day, coupled with the analysts view on the major business events. COMPANY INFORMATION An overall company snapshot captures all the relevant details including contact information, top management, listings, latest financial results, market performance, news, shareholding pattern and announcements.

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TRADING GUIDELINES Equity trading is no more risky, as now ATS is there with you to take care of your investment portfolio by providing assistance in the world of stock markets. We support our customers by providing them timely recommendations, fact based reliable and "dependable" research calls. Bundled with this, we also offer value-added tools and services to our customers to enrich their trading know how.

Investing in equities is considered risky due to the highly volatile nature of stock markets and their dependence on the varied factors ranging from global and domestic economic and political situations. However, the high returns from equities offset the underlying risk and can become the best option for long term wealth accumulation. Hence, before investing you should always a consult a knowledgeable and experienced expert who will guide you during the course of investment process. We want to explain some trading guidelines, please implement our trading guidelines. Trade management is more important than successful trading tips.

1. Please place stop loss orders in trading system not in your mind, without stop loss don't trade its nothing but suicide attempt.

2. Trade all our tips, do not select our tips. If you have Rs.50,000 rupees, non risky traders fix your each trade value as Rs.25,000 (50% value of your cash), risky traders fix your each trade value as Rs.50,000(100% value of your cash).

3. Book 75% quantity at first target then change stop loss to actual recommended price for remaining quantity, place first target order in advance, some times price come and go very quickly. Execute trades very quickly price movements are very sharp in intraday.

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4. Small difference is common, you can execute trades with small difference, do not look for exact recommended entry prices and target prices.

5. If you trade all our tips and maintain all trades equal value then only profits and losses will be balanced systematically.

6. Please trade with trading discipline; if we protect our capital with good trading discipline, profits automatically follow otherwise only luck will dominate you. Dont depend on luck.

7. Always trade with 1 lot after recover your principal amount, you can trade as you want.

8. Trade in the most active markets and avoid inactive markets. Also, trade the contract with the most open interest. They are more liquid.

months

9. What is meaning of trade reverse:

For example if we buy and stop loss trigger, sell at stop loss price then buy position will become sell position, easy method to reverse to trade: just place double quantity stop loss order

10. Avoid taking small profits and big losses, never add to a losing position.

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INDUSTRY PROFILE OF FDI FOREIGN DIRECT INVESTMENT INDUSTRY IN INDIA

Introduction India is a country that has been able to restore investor confidence in its markets, even during the toughest of times. Increase in capital inflows, foreign direct investments (FDI) and overseas entities participation reflect the fact that Indian markets have fared well in recent times. Moreover, foreign companies are viewing the South-Asian nation as a strategic hub for their operations and investments owing to investor-friendly policy environment, positive eco-system and huge potential for growth. India Incs increasing presence over the global canvas and Indian governments consistent support to the FDI space have facilitated remarkable developments and investments from overseas partners. Some of them are discussed hereafter: Key Statistics

FDI inflows rose by 36 per cent to US$ 23.69 billion during January-October 2011, while the cumulative amount of FDI equity inflows from April 2000 to October 2011 stood at US$ 226.05 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). The services (including financial and non-financial) sectors attracted highest FDI equity inflows during April-October 2011-12 at US$ 3.43 billion. India received maximum FDI from countries like Mauritius, Singapore, and the US at US$ 61.2 billion, US$ 15.2 billion and US$ 10 billion, respectively, during April 2000-October 2011.

Global consultancy firm Ernst & Young (E&Y) has stated that the value of mergers and acquisition (M&A) deals involving Indian companies aggregated to US$ 34.4 billion in 2011 involving 806 transactions. There were 177 outbound deals with an aggregate disclosed value of US$ 8.8 billion in 2011; forming 25.6 per cent of the total M&A pie.

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Adani Enterprises acquisition of Abbot Point Coal Terminal in Australia (US$ 2 billion) and the GVK Groups purchase of Australia-based Hancock Coals Queensland coal assets (US$ 1.3 billion) were among the biggest outbound deals recorded in 2011.

According to data released by auditing and consultancy firm KPMG, India Inc witnessed a 31 per cent increment in private equity (PE) investment to US$ 7.89 billion during the first three quarters of 2011. PE firms like Blackstone India and Kohlberg Kravis Roberts & Co (KKR & Co) are betting high on Indian markets. The Blackstone India chief was reported to have said that he intends to close 5-6 deals a year in India whose financial valuations would revolve around roughly US$ 100 million to US$ 120 million each.

According to the weekly statistical supplement of the Reserve Bank of India (RBI), Indias foreign exchange reserves (forex) stood at US$ 293.54 billion for the week ended January 6, 2012. Foreign currency assets aggregated to US$ 259.80 billion and the value of gold reserves stood at US$ 26.62 billion for the week. The value of special drawing rights (SDRs) was calculated at US$ 4.41 billion, and India's reserves with the International Monetary Fund (IMF) came out to be US$$ 2.69 billion.

Important Developments The government of India is continuously working towards increasing FDI flows into the country. FDI rose by an impressive 56 per cent to US$ 2.53 billion in November 2011. The cumulative flows of for April-November 2011 aggregated to US$ 22.83 billion, exceeding the total FDI of US$ 19.43 billion for 2010-11 fiscal. Recently, the Government has approved 20 FDI proposals worth Rs 1,935.24 crore (US$ 384.5 million). The approved major investments, that were consulted with Foreign Investment Promotion Board (FIPB) as well, are enlisted below:

Sterlite Grid had proposed to act as an investment company and invest Rs 1,150 crore (US$ 228.48 million) via FDI

Equitas Micro Finance would invest Rs 230.7 crore (US$ 45.83 million) for demerging its microfinance business with its wholly-owned subsidiary

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TV Vision proposed to induce Rs 200 crore (US$ 39.81 million) of foreign investment through an issue of equity shares via an initial public offer (IPO). The deal is to undertake the business of broadcasting a non-news and current affairs TV channel New York-based Chatwal Hotels & Resorts LLC plans to expand its foothold in India by inducing US$ 200 million and open over 50 hotels during 2012-17. The expansion would take place through the franchise model wherein local partners would help in development. German luxury car maker Mercedes-Benz would invest Rs 1000 crore (US$ 199 million) in its Indian operations with an aim to enhance its capacity and increase sales. The company, facing fierce competition from brands like BMW and Volkswagen, intends to increase its sales to 25, 000 units by 2016 and to 90, 000 units by 2020. Marking the biggest FDI in Indian mutual fund space, Japans Nippon Life Insurance Co has acquired 26 per cent stake in Reliance Capital Asset Management for Rs 1,450 crore (US$ 288.64 million). Japan is planning to enhance its investments in the Indian road and maritime sectors. The Asian country has already infused investments in the railways and metro rail transportation in India by part-funding the rail-freight corridor and the Delhi Metro Rail infrastructure. It is also curious to impart financial assistance to the proposed high-speed train projects in India. Policy Initiatives In a bid to enable foreign brands expand their presence in the flourishing Indian market, the RBI has finally notified changes in FDI policy relating to single-brand retailing. This implies that restrictions on foreign investments in single-brand retail have been eradicated and FDI up to 100 per cent is being allowed for the same. Making another modification in Foreign Exchange Management Act (FEMA), the RBI has given its nod to notify FDI in limited liability partnerships (LLPs). This form of organisation is very popular globally and 6, 738 of them are operational in India.

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The Government has recently stated that it may soon launch a process that would enable foreign airlines to hold 49 per cent stake in Indian carriers. The move would mark a major modification in policies as earlier FDI was allowed in Indian aviation sector but foreign airlines were not allowed to hold stakes. There is a possibility that FDI cap in the sector could be raised to 51 per cent from 49 per cent. In order to expand investor base, reduce market volatility, attract more foreign funds and deepen Indian capital markets, the Government has allowed a foreign individual, a foreign pension fund or even a foreign trust to invest directly in the Indian equity market. These investors will be called Qualified Foreign Investors' (QFIs). Future Outlook Morgan Stanley anticipates that India could attract FDI worth as much as US$ 80 billion in next 1-2 years while KPMG officials believe that FDI in 2011-12 may cross the US$ 35 billion mark. Exchange Rate Used: INR 1 = US$ 0.0199 as on January 20, 2012 SECTOR SPECIFIC FOREIGN DIRECT INVESTMENT IN INDIA HOTEL & TOURISM: FDI IN HOTEL & TOURISM SECTOR IN INDIA 100% FDI is permissible in the sector on the automatic route. The term hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports, and health units for tourists and Convention/Seminar units and organizations.

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For foreign technology agreements, automatic approval is granted if i. up to 3% of the capital cost of the project is proposed to be paid for technical and consultancy services including fees for architects, design, supervision, etc. ii. up to 3% of net turnover is payable for franchising and marketing/publicity support fee, and up to 10% of gross operating profit is payable for management fee, including incentive fee. PRIVATE SECTOR BANKING: NON-BANKING FINANCIAL COMPANIES (NBFC) 49% FDI is allowed from all sources on the automatic route subject to guidelines issued from RBI from time to time. a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be as per levels indicated below: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv. xv. Merchant banking Underwriting Portfolio Management Services Investment Advisory Services Financial Consultancy Stock Broking Asset Management Venture Capital Custodial Services Factoring Credit Reference Agencies Credit rating Agencies Leasing & Finance Housing Finance Foreign Exchange Brokering
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xvi. xvii. xviii. xix.

Credit card business Money changing Business Micro Credit Rural Credit

b. Minimum Capitalization Norms for fund based NBFCs: i) For FDI up to 51% - US$ 0.5 million to be brought upfront ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million to be brought upfront and the balance in 24 months c. Minimum capitalization norms for non-fund based activities: Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted nonfund based NBFCs with foreign investment. d. Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50 million as at b) (iii) above (without any restriction on number of operating subsidiaries without bringing in additional capital) e. Joint Venture operating NBFC's that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capital inflow i.e. (b)(i) and (b)(ii) above. f. FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this regard.

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INSURANCE SECTOR: FDI IN INSURANCE SECTOR IN INDIA FDI up to 26% in the Insurance sector is allowed on the automatic route subject to obtaining licence from Insurance Regulatory & Development Authority (IRDA) TELECOMMUNICATION: FDI IN TELECOMMUNICATION SECTOR i. In basic, cellular, value added services and global mobile personal communications by satellite, FDI is limited to 49% subject to licensing and security requirements and adherence by the companies (who are investing and the companies in which investment is being made) to the license conditions for foreign equity cap and lock- in period for transfer and addition of equity and other license provisions. ii. ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74% with FDI, beyond 49% requiring Government approval. These services would be subject to licensing and security requirements. iii. iv. No equity cap is applicable to manufacturing activities. FDI up to 100% is allowed for the following activities in the telecom sector : a. b. c. d. ISPs not providing gateways (both for satellite and submarine cables); Infrastructure Providers providing dark fiber (IP Category 1); Electronic Mail; and Voice Mail The above would be subject to the following conditions: e. FDI up to 100% is allowed subject to the condition that such companies would divest 26% of their equity in favor of Indian public in 5 years, if these companies are listed in other parts of the world. f. The above services would be subject to licensing and security requirements, wherever required. Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.

47

TRADING: FDI IN TRADING COMPANIES IN INDIA Trading is permitted under automatic route with FDI up to 51% provided it is primarily export activities, and the undertaking is an export house/trading house/super trading house/star trading house. However, under the FIPB route:i. 100% FDI is permitted in case of trading companies for the following activities:

exports; bulk imports with ex-port/ex-bonded warehouse sales; cash and carry wholesale trading; other import of goods or services provided at least 75% is for procurement and sale of goods and services among the companies of the same group and not for third party use or onward transfer/distribution/sales.

ii. The following kinds of trading are also permitted, subject to provisions of EXIM Policy: a. Companies for providing after sales services (that is not trading per se) b. Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their joint ventures in which they have equity participation in India. c. Trading of hi-tech items/items requiring specialized after sales service d. Trading of items for social sector e. Trading of hi-tech, medical and diagnostic items. f. Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name. g. Domestic sourcing of products for exports. h. Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commences simultaneously with test marketing.

48

FDI up to 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favor of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.

POWER: FDI IN POWER SECTOR IN INDIA Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment. DRUGS & PHARMACEUTICALS FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical, provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology, and specific cell / tissue targeted formulations. FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology, and specific cell / tissue targeted formulations will require prior Government approval. ROADS, HIGHWAYS, PORTS AND HARBORS FDI up to 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbors. POLLUTION CONTROL AND MANAGEMENT FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route. CALL CENTERS IN INDIA / CALL CENTRES IN INDIA FDI up to 100% is allowed subject to certain conditions.
49

BUSINESS PROCESS OUTSOURCING BPO IN INDIA FDI up to 100% is allowed subject to certain conditions. SPECIAL FACILITIES AND RULES FOR NRI'S AND OCB'S NRI's and OCB's are allowed the following special facilities: 1. Direct investment in industry, trade, infrastructure etc. 2. Up to 100% equity with full repatriation facility for capital and dividends in the following sectors:

i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii.

34 High Priority Industry Groups Export Trading Companies Hotels and Tourism-related Projects Hospitals, Diagnostic Centers Shipping Deep Sea Fishing Oil Exploration Power Housing and Real Estate Development Highways, Bridges and Ports Sick Industrial Units Industries Requiring Compulsory Licensing Industries Reserved for Small Scale Sector

3. Up to 40% Equity with full repatriation: New Issues of Existing Companies raising Capital through Public Issue up to 40% of the new Capital Issue. 4. On non-repatriation basis: Up to 100% Equity in any Proprietary or Partnership engaged in Industrial, Commercial or Trading Activity.

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5. Portfolio Investment on repatriation basis: Up to 1% of the Paid up Value of the equity Capital or Convertible Debentures of the Company by each NRI. Investment in Government Securities, Units of UTI, National Plan/Saving Certificates. 6. On Non-Repatriation Basis: Acquisition of shares of an Indian Company, through a General Body Resolution, up to 24% of the Paid Up Value of the Company. 7. Other Facilities: Income Tax is at a Flat Rate of 20% on Income arising from Shares or Debentures of an Indian Company. Certain terms and conditions do apply. FOREIGN DIRECT INVESTMENT IN SMALL SCALE INDUSTRIES (SSI'S) IN INDIA Recently, India has allowed Foreign Direct Investment up to 100% in many manufacturing industries which were designated as Small Scale Industries. India further ended in February 2008 the monopoly of small-scale units on 79 items, leaving just 35 on the reserved list that once had as many as 873 items.

While industrial policy reforms began with the new industrial policy statement of 1991, India remained wary of intruding on the politically sensitive issue of reservation for small-scale industry till the end of the 1990s.

Thus, while at the turn of the millennium the number of items reserved for SSI units had come down from its peak of 873 in 1984, well over 800 items remained on the list.

Since 2002, the scenario has changed dramatically. In these last seven years, around 790 items including things like farm equipment, toothpaste, ice cream, footwear, detergents and even garments - have been knocked off the list.

Thus, for the first time in over 40 years, there are today as few as 35 items reserved for SSI units. When the policy of reservation was first introduced in 1967, there were just 47 items reserved for small-scale manufacturers.

51

However, what was till then an administrative decision was given legal backing by an amendment enacted in 1984 to the Industries (Development and Regulation) Act, 1951. That year also saw the number of items reserved reaching a peak of 873.

Reservation means that units producing the reserved items cannot go beyond a stipulated cap on investment in plant and machinery. Moreover, FDI was allowed on a limited basis in SSI's.

In the old days, therefore, it was standard practice for mass consumption items covered by the reserved list to be farmed out by large marketing companies to dozens of small units, thereby negating economies of scale.

What it also meant was that some companies resorted to manufacturing completely new class of products. So, if ice cream was reserved for small scale units, a large player could always produce, say, 'frozen desserts'.

Apart from the steady trickle of de-reservation over the last decade, one of the measures taken to get over this problem without confronting the political problems involved was to allow foreign investment even in reserved items with the caveat that such units would have to fulfill an export obligation.

For players who were already manufacturing items that were suddenly reserved in 1967, the government came up with what was carry-on-business license which capped their capacity, and fixed the location of the plant and the goods produced.

The latest de-reservation means that pastries, hard boiled sugar candy and tooth powder can be manufactured by large units too. Similarly, buckets, paper bags, paper cups, envelopes, letter pads, paper napkins might not be manufactured only in small units but also in specialized factories.

52

The same for sesame and rapeseed oil, which are not solvent extracted, a host of chemicals and dyes paints be it distempers.

Electrical goods, which include geysers, hot air blowers and toasters, too are out of the reserved list, as are ballpoint and fountain pens. The remaining 35 items that would be produced by the SSI sector are food and allied items, wood, wood products, paper, paper products, plastic products, organic chemicals, drugs, drug intermediates, other chemicals, chemical products, glass, ceramics, mechanical engineering and electrical machines, appliances and apparatus. In a nutshell, only 35 items remain reserved for the small scale industries sector. For foreign investors, it means that in those 35 reserved sectors foreign investment is allowed on a limited basis, except where certain conditions are met. INDIA FURTHER OPENS UP KEY SECTORS FOR FOREIGN INVESTMENT India has liberalized foreign investment regulations in key sectors, opening up commodity exchanges, credit information services and aircraft maintenance operations. The foreign investment limit in Public Sector Units (PSU) refineries has been raised from 26% to 49%. An additional sweetener is that the mandatory disinvestment clause within five years has been done away with.

FDI in Civil aviation up to 74% will now be allowed through the automatic route for nonscheduled and cargo airlines, as also for ground handling activities.

100% FDI in aircraft maintenance and repair operations has also been allowed. But the big one, allowing foreign airlines to pick up a stake in domestic carriers has been given a miss again.

India has decided to allow 26% FDI and 23% FII investments in commodity exchanges, subject to the proviso that no single entity will hold more than 5% of the stake.

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Sectors like credit information companies, industrial parks and construction and development projects have also been opened up to more foreign investment.

Also keeping India's civilian nuclear ambitions in mind, India has also allowed 100% FDI in mining of titanium, a mineral which is abundant in India.

Sources say the government wants to send out a signal that it is not done with reforms yet. At the same time, critics say contentious issues like FDI and multi-brand retail are out of the policy radar because of political compulsions. (Jan 2008)

54

55

DATA ANALYSIS AND INTERPRETATIONS India has liberalized foreign investment regulations in key sectors, opening up commodity exchanges, credit information services and aircraft maintenance operations. The foreign investment limit in Public Sector Units (PSU) refineries has been raised from 26% to 49%. An additional sweetener is that the mandatory disinvestment clause within five years has been done away with. FDI in Civil aviation up to 74% will now be allowed through the automatic route for non-scheduled and cargo airlines, as also for ground handling activities. 100% FDI in aircraft maintenance and repair operations has also been allowed. But the big one, allowing foreign airlines to pick up a stake in domestic carriers has been given a miss again. India has decided to allow 26% FDI and 23% FII investments in commodity exchanges, subject to the proviso that no single entity will hold more than 5% of the stake. Sectors like credit information companies, industrial parks and construction and development projects have also been opened up to more foreign investment. Also keeping India's civilian nuclear ambitions in mind, India has also allowed 100% FDI in mining of titanium, a mineral which is abundant in India. Sources say the government wants to send out a signal that it is not done with reforms yet. At the same time, critics say contentious issues like FDI and multi-brand retail are out of the policy radar because of political compulsions.

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Sector-wise FDI Inflows ( From April 2002to January 2012) AMOUNT OF FDI SECTOR INFLOWS In US$ Million 18118.40 8876.43 6215.55 5029.01 3310.23 5118.85 3129.66 1964.06 1551.88 2612.85 1324.92 1621.03 2244.17 1480.94 1112.92 22.39 11.12 7.83 6.07 4.17 6.20 3.90 2.47 1.80 3.11 1.63 2.01 2.68 1.77 1.38 PERCENT OF TOTAL FDI INFLOWS (In terms of Rs) In Rs Million

Services Sector Computer Software & hardware Telecommunications Construction Activities Automobile Housing & Real estate Power Chemicals (Other than Fertilizers) Ports Metallurgical industries Electrical Equipments Cement & Gypsum Products Petroleum & Natural Gas Trading Consultancy Services

787420.81 391109.74 275441.38 213595.12 146799.41 217936.02 137089.37 87008.07 63290.50 109563.20 57379.63 70781.19 94417.17 62416.85 48647.43

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Hotel and Tourism Food Processing Industries Electronics Misc. Mechanical & Engineering industries Information & Broadcasting (Incl. Print media) Mining Textiles (Incl. Dyed, Printed) Sea Transport Hospital & Diagnostic Centers Fermentation Industries Machine Tools Air Transport ( Incl. air freight) Ceramics Rubber Goods Agriculture Services Industrial Machinery Paper & Pulp

52500.05 34362.49 33914.75 28310.13

1217.50 760.32 748.57 648.86

1.49 0.98 0.96 0.80

52115.90

1194.20

1.48

21204.94 26736.94 17653.81 27241.42 27743.46 10955.32 10552.19 17462.43 11392.76 7937.13 13748.27 18612.76

522.86 611.03 402.59 644.73 658.04 247.88 240.71 409.92 247.60 188.39 316.97 429.06 0.50 0.77 0.79 0.31 0.30 0.50 0.32 0.23 0.39 0.53

0.60 0.76

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Diamond & Gold Ornaments Agricultural Machinery Earth Moving Machinery Commercial, Office & Household Equipments Glass Printing of Books (Incl. Litho printing industry) Soaps, Cosmetics and Toilet Preparations Medical & Surgical Appliances Education Fertilizers Photographic raw Film & Paper Railway related components Vegetable oils and Vanaspati Sugar Tea & Coffee Leather, Leather goods & Packers

11014.62 6649.12 5749.34 5798.71 5683.60 6066.23

248.15 148.37 134.22 132.74 126.51 135.80

0.31 0.19 0.16 0.16 0.16 0.17

4984.88

114.54

0.14

8087.87 14374.11 4282.17 2580.20

177.42 309.09 96.59 63.90

0.23 0.41 0.12 0.07

3281.85

75.11

0.09

3769.18 1836.64 3774.81 1621.56

83.69 41.58 84.28 36.74

0.11 0.05 0.11 0.05

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Non-conventional energy Industrial instruments Scientific instruments Glue and Gelatine Boilers & steam generating plants Dye-Stuffs Retail Trading (Single brand) Coal Production Coir Timber products Prime Mover (Other than electrical generators Defence Industries Mathematical, Surveying & drawing instruments Misc. industries

3640.58 1368.36 511.44 385.80 238.67 406.48 1074.67 614.10 50.17 139.59 178.30 6.87 50.35 180561.54

86.84 29.47 11.64 8.44 5.40 9.52 25.18 15.42 1.12 3.10 3.72 0.15 1.27 4162.55

0.10 0.04 0.01 0.01 0.01 0.01 0.03 0.02 0.00 0.00 0.01 0.00 0.00 5.19

Sub Total Stock Swapped (from 2002 to 2008) Advance of Inflows

3517310.79 145466.35 89622.22

81010.63 3391.07 1962.82

60

100.00 -

(from 2000 to 2004) RBI's NRI Schemes Grand Total 5330.60 3757729.96 121.33 86395.85 -

Sector wise FDI inflows

SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India

ANALYSIS OF FORBIDDEN TERRITORIES:

Arms and ammunition Atomic Energy Coal and lignite Rail Transport Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds, copper, zinc.

Foreign Investment through GDRs (Euro Issues) Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). GDR investments are treated as FDI and are designated in dollars and are not subject to any ceilings on investment. An applicant company seeking Government's approval in this regard should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. This condition would be relaxed for infrastructure projects such as power generation, telecommunication, petroleum exploration and refining, ports, airports and roads. 1. Clearance from FIPB There is no restriction on the number of Euro-issue to be floated by a company or a group of companies in the financial year. A company engaged in the manufacture of items covered under
61

Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro issue is likely to exceed 51% or which is implementing a project not contained in Annex-III, would need to obtain prior FIPB clearance before seeking final approval from Ministry of Finance. 2. Use of GDRs The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure including domestic purchase/installation of plant, equipment and building and investment in software development, prepayment or scheduled repayment of earlier external borrowings, and equity investment in JV/WOSs in India.

FOREIGN DIRECT INVESTMENTS IN INDIA ARE APPROVED THROUGH TWO ROUTES 1. Automatic approval by RBI The Reserve Bank of India accords automatic approval within a period of two weeks (subject to compliance of norms) to all proposals and permits foreign equity up to 24%; 50%; 51%; 74% and 100% is allowed depending on the category of industries and the sectoral caps applicable. The lists are comprehensive and cover most industries of interest to foreign companies. Investments in high priority industries or for trading companies primarily engaged in exporting are given almost automatic Approval by the RBI. 2. The FIPB Route Processing of non-automatic approval cases FIPB stands for Foreign Investment Promotion Board which approves all other cases where the parameters of automatic approval are not met. Normal processing time is 4 to 6 weeks. Its approach is liberal for all sectors and all types of proposals, and rejections are few. It is not necessary for foreign investors to have a local partner, even when the foreign investor wishes to hold less than the entire equity of the company. The portion of the equity not proposed to be held by the foreign investor can be offered to the public.

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ANALYSIS OF SECTOR SPECIFIC POLICY FOR FDI

Sr. No. 1. 2. 3. 4.

Sector/Activity

FDI cap/Equity

Entry/Route

Hotel & Tourism NBFC Insurance Telecommunication: cellular, value added services ISPs with gateways, radio-paging Electronic Mail & Voice Mail

100% 49% 26%

Automatic Automatic Automatic Automatic

49% Above 49% need Govt. 74% 100% license

5.

Trading companies: primarily export activities bulk imports, cash and carry wholesale trading 100% Automatic 51% Automatic

6.

Power(other than atomic reactor power plants) 100% Automatic Automatic Automatic Automatic Automatic Automatic

7. 8. 9. 10 11. 12. i. ii. iii. iv. v. vi.

Drugs & Pharmaceuticals Roads, Highways, Ports and Harbors Pollution Control and Management Call Centers BPO For NRI's and OCB's: 34 High Priority Industry Groups Export Trading Companies Hotels and Tourism-related Projects Hospitals, Diagnostic Centers Shipping Deep Sea Fishing
63

100% 100% 100% 100% 100%

100%

Automatic

vii. viii. ix. x. xi. xii. xiii. 13.

Oil Exploration Power Housing and Real Estate Development Highways, Bridges and Ports Sick Industrial Units Industries Requiring Compulsory Licensing Industries Reserved for Small Scale Sector Airports: Greenfield projects Existing projects 100% 100% 49% 100% 100% Automatic Beyond 74% FIPB FIPB FIPB FIPB FIPB

14 15. 16. 17.

Assets reconstruction company Cigars and cigarettes Courier services

Investing companies in infrastructure (other 49% than telecom sector)

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ANALYSIS OF FDI INFLOW IN INDIA From April 2002 to August 2012 (Amount US$ in Millions) S.No Financial Year Total FDI Inflows % Growth Over Previous Year 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 4,029 6,130 5,035 4,322 6,051 8,961 22,826 34,362 35,168 16,232 ---(+) 52 (-) 18 (-) 14 (+) 40 (+) 48 (+) 146 (+) 51 (+) 02 ----

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ANALYSIS OF SHARE OF TOP TEN INVESTING COUNTRIES FDI EQUITY IN FLOWS From April 2002 to January 2012 (Amount in Millions) Sr. No Country Amount of FDI Inflows % As To FDI

Total Inflow 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Mauritius Singapore U.S.A. U.K. Netherlands Japan Cyprus Germany France U.A.E. 19,18,633.61 3,80,142.56 3,32,935.60 2,40,974.98 1,78,047.76 1,50,129.05 1,32,448.04 1,12,242.06 61,686.39 50,915.59 44.01 8.72 7.64 5.53 4.08 3.44 3.04 2.57 1.42 1.17

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Mauritius Mauritius invested Rs.19, 18, 633 million in India Up to the January 2010, equal to 44.01 percent of total FDI inflows. Many companies based outside of India utilize Mauritian holding

companies to take advantage of the India- Mauritius Double Taxation Avoidance Agreement (DTAA). The DTAA allows foreign firms to bypass Indian capital gains taxes, and may allow some India-based firms to avoid paying certain taxes through a process known as round tripping.

The extent of round tripping by Indian companies through Mauritius is unknown. However, the Indian government is concerned enough about this problem to have asked the government of Mauritius to set up a joint monitoring mechanism to study these investment flows. The potential loss of tax revenue is of particular concern to the Indian government. These are the sectors which attracting more FDI from Mauritius Electrical equipment Gypsum and cement products Telecommunications Services sector that includes both non- financial and financial Fuels.

Singapore Singapore continues to be the single largest investor in India amongst the Singapore with FDI inflows into Rs. 3, 80,142 crores up to January 2010 Sector-wise distribution of FDI inflows received from Singapore the highest inflows have been in the services sector (financial and non financial), which accounts for about 30% of FDI inflows from Singapore. Petroleum and natural gas occupies the second place followed by computer software and hardware, mining and construction. U.S.A. The United States is the third largest source of FDI in India (7.64 % of the total), valued at 732335 crore in cumulative inflows up to January 2010. According to the Indian government, the top sectors attracting FDI from the United States to India are fuel, telecommunications, electrical equipment, food processing, and services. According to the available M&A data, the two top sectors attracting FDI inflows from the United States are computer systems design and programming and manufacturing

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U.K. The United Kingdom is the fourth largest source of FDI in India (5.53 % of the total), valued at 2, 40,974 crores in cumulative inflows up to January 2010 Over 17 UK companies under the aegis of the Nuclear Industry Association of UK have tied up with Ficci to identify joint venture and FDI possibilities in the civil nuclear energy sector. UK companies and policy makers the focus sectors for joint ventures, partnerships, and trade are non-conventional energy, IT, precision engineering, medical equipment, infrastructure equipment, and creative industries.

Netherlands FDI from Netherlands to India has increased at a very fast pace over the last few years. Netherlands ranks fifth among all the countries that make investments in India. The total flow of FDI from Netherlands to India came to Rs. 1, 78,047 crores between 1991 and 2002. The total percentage of FDI from Netherlands to India stood at 4.08% out of the total foreign direct investment in the country up to August 2009. Following Various industries attracting FDI from Netherlands to India are:

Food processing industries Telecommunications that includes services of cellular mobile, basic telephone, and radio paging

Horticulture Electrical equipment that includes computer software and electronics Service sector that includes non- financial and financial services

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ANALYSIS OF SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS From April 2002 to March 2012 (Amount in Millions) Sr. No Country Amount Inflows of FDI % As To FDI

Total Inflow

1.

Service Sector (Financial & Non-Financial)

9,65,210.77

22.14

2. 3. 4. 5. 6. 7. 8. 9. 10.

Computer Software & Hardware Telecommunication Housing & Real Estate Construction Activities Automobile Industry Power Metallurgical Industries Petroleum & Natural Gas Chemical

4,13,419.03 3,68,899.62 3,25,021.36 2,65,492.96 1,90,172.22 1,79,849.92 1,25,785.57 1,11,957.00 1,01,680.18

9.48 8.46 7.46 6.09 4.36 4.13 2.89 2.57 2.33

The sectors receiving the largest shares of total FDI inflows up to arch 2010 were the service sector and computer software and hardware sector, each accounting for 22.14 and 9.48 percent respectively. These were followed by the telecommunications, real estate, construction and automobile sectors. The top sectors attracting FDI into India via M&A activity were manufacturing; information; and professional, scientific, and technical services. These sectors correspond closely with the sectors identified by the Indian government as attracting the largest shares of FDI inflows overall. The ASSOCHAM has revealed that FDI in Chemicals sector (other than fertilizers) registered maximum growth of 227 per cent during April 2008 March 2009 as compared to 11.71 per cent during the last fiscal. The sector attracted USD 749 million FDI in FY 09 as compared to USD 229 million in FY 08.
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During the year 2009 government had raised the FDI limit in telecom sector from 49 per cent to 74 per, which has contributed to the robust growth of FDI. The telecom sector registered a growth of 103 per cent during fiscal 2008-09 as compared to previous fiscal. The sector attracted USD 2558 million FDI in FY 09 as compared to the USD 1261 million in FY 08, acquired 9.37 per cent share in total FDI inflow. India automobile sector has been able to record 70 per cent growth in foreign investment. The FDI inflow in automobile sector has increased from USD 675 million to 1,152 million in FY 09 over FY 08. The other sectors which registered growth in highest FDI inflow during April March 2009 were housing & real estate (28.55 per cent), computer software & hardware (18.94 per cent), construction activities including road & highways (16.35 per cent) and power (1.86 per cent).

ANALYSIS OF FOREIGN INVESTMENT PROMOTION BOARD The FIPB (Foreign Investment Promotion Board) is a government body that offers a single window clearance for proposals on foreign direct investment in the country that is not allowed access through the automatic route. Consisting of Senior Secretaries drawn from different ministries with Secretary ,Economic Affairs in the chair, this high powered body discusses and examines proposals for foreign investment in the country for restricted sectors ( as laid out in the Press notes and extant foreign investment policy) on a regular basis. Currently proposals for investment beyond 600 crores require the concurrence of the CCEA (Cabinet Committee on Economic Affairs). The threshold limit is likely to be raised to 1200 core soon. The Board thus plays an important role in the administration and implementation of the Governments FDI policy. In circumstances where there is ambiguity or a conflict of interpretation, the FIPB has stepped in to provide solutions. Through its fast track working it has established its reputation as a body that does not unreasonably delay and is objective in its decision making. It therefore has a strong record of actively encouraging the flow of FDI into the country. The FIPB is assisted in this task by a FIPB Secretariat. The launch of e- filing facility is an important initiative of the Secretariat to further the cause of enhanced accessibility and transparency .

70

LOW INCOME COUNTRIES IN GLOBAL FDI RACE The situation of foreign direct investment has been relatively good in the recent times with an increase of 38%. Normally, the foreign direct investment is made mostly into the extractive industries. However, now the foreign direct investors are also looking to pump money into the manufacturing industry that has garnered 47% of the total foreign direct investment made in 1992. However, the situation has not been the same in the countries with a middle income range. The middle income countries have not received a steady inflow of foreign direct income coming their way. The situation is comparatively better in the low income countries. They have had an uninterrupted and continually increasing flow of foreign direct investment. It has been observed that the various debt crises, as well as, other forms of economic crises have had less effect on these countries. These countries had lesser amounts of commercial bank obligations, which again had been caused by the absence of proper financial markets, as well as the fact that their economies were not open to foreign direct investment. During the later phases of the decade of 70s the Asian countries started encouraging foreign direct investments in their economies. China has received the most of the foreign direct investment that was pumped into the countries with low income. It accounted for as much as 86% of the total foreign direct investment made in the lower income countries in with low income. It accounted for as much as 86% of the total foreign direct investment made in the lower income countries in 1995. The economic liberalization in China started in 1979. This led to an increase in the foreign direct investment in China. In the years between 1982 and 1991 the average foreign direct investment in China was US$ 2.5 billion. This average increased by seven times to become US$ 37.5 billion during 1995. A significant amount of the foreign direct investment in China was provided in the industrial sector. It was as much as 68%. Around 20% of the foreign direct investment of China was made in the real estate sector. During the same period Nigeria had been the second best in terms of receiving foreign direct investment. In the recent times India has risen to be the third major foreign direct investment destination in the recent years. Foreign direct investment started in India in 1991 with the initiation of the economic liberation.
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There were more initiatives that enabled India to garner foreign direct investments worth US$ 2.9 billion from 1991 to 1995. This was a significant increase from the previous twenty years when the total foreign direct investment in India was US$1 billion. Most of the foreign direct investment made in India has been in the infrastructural areas like telecommunications and power. In the manufacturing industry the emphasis has been on petroleum refining, vehicles and petrochemicals Vietnam is a low income country, which is supposed to have the same potential as China to generate foreign direct investment. The foreign direct investment laws were introduced in Vietnam in 1987-88. This led to an increase in the foreign direct investment made in the country. The amount stood at US$ 25 million in 1993 compared to US$ 8 million in 1993. This amount increased by 3 times after the USA removed its economic sanctions in 1994. The gas and petroleum industries were the biggest beneficiaries of the foreign direct investment. Bangladesh started receiving increasing foreign direct investment after 1991, when the economic reforms took place in the country. After 1991 it was possible for foreign companies to set up companies in Bangladesh without taking permission beforehand. The foreign direct investment rose from US$ 11 million in 1994 to US$ 125 million in 1995. As per the available statistics the manufacturing industry, comprising of clothing and textiles took up 20% of the total approved foreign direct investment. Food processing, chemicals and electric machinery were also important in this regard. The increase in the foreign direct investment in Ghana was remarkable as well. The figures increased from US$11.7 million, on an average, from 1986 to 1992 to US$ 201 million, on an average, from 1993 to 1995. This improvement was brought about by the privatization of the Ashanti Goldfields.

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FOREIGN INSTITUTIONAL INVESTMENT (FII)

Introduction to FII Since 1990-91, the Government of India embarked on liberalization and economic reforms with a view of bringing about rapid and substantial economic growth and move towards globalization of the economy. As a part of the reforms process, the Government under its New Industrial Policy revamped its foreign investment policy recognizing the growing importance of foreign direct investment as an instrument of technology transfer, augmentation of foreign exchange reserves and globalization of the Indian economy. Simultaneously, the Government, for the first time, permitted portfolio investments from abroad by foreign institutional investors in the Indian capital market. The entry of FIIs seems to be a follow up of the recommendation of the Narsimhan Committee Report on Financial System. While recommending their entry, the Committee, however did not elaborate on the objectives of the suggested policy. The committee only suggested that the capital market should be gradually opened up to foreign portfolio investments.

From September 14, 1992 with suitable restrictions, FIIs were permitted to invest in all the securities traded on the primary and secondary markets, including shares, debentures and warrants issued by companies which were listed or were to be listed on the Stock Exchanges in India. While presenting the Budget for 1992-93, the then Finance Minister Dr. Manmohan Singh had announced a proposal to allow reputed foreign investors, such as Pension Funds etc., to invest in Indian capital market.

Market design in India for foreign institutional investors Foreign Institutional Investors means an institution established or incorporated outside India which proposes to make investment in India in securities. A Working Group for Streamlining of the Procedures relating to FIIs, constituted in April, 2003, inter alia, recommended streamlining of SEBI registration procedure, and suggested that dual approval process of SEBI and RBI be changed to a single approval process of SEBI. This recommendation was implemented in December 2003.

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Currently, entities eligible to invest under the FII route are as follows:

As FII: Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies, a trustee or power of attorney holder incorporated or established outside India proposing to make proprietary investments or with no single investor holding more than 10 per cent of the shares or units of the fund.

As Sub-accounts: The sub account is generally the underlying fund on whose behalf the FII invests. The following entities are eligible to be registered as sub-accounts, viz. partnership firms, private company, public company, pension fund, investment trust, and individuals.

FIIs registered with SEBI fall under the following categories:

a) Regular FIIs- those who are required to invest not less than 70 % of their investment in equityrelated instruments and 30 % in non-equity instruments.

b) 100 % debt-fund FIIs- those who are permitted to invest only in debt instruments.

The Government guidelines for FII of 1992 allowed, inter-alia, entities such as asset management companies, nominee companies and incorporated/institutional portfolio managers or their power of attorney holders (providing discretionary and non-discretionary portfolio management services) to be registered as FIIs. While the guidelines did not have a specific provision regarding clients, in the application form the details of clients on whose behalf investments were being made were sought.

While granting registration to the FII, permission was also granted for making investments in the names of such clients. Asset management companies/portfolio managers are basically in the business of managing funds and investing them on behalf of their funds/clients. Hence, the intention of the guidelines was to allow these categories of investors to invest funds in India on behalf of their 'clients'. These 'clients' later came to be known as sub-accounts. The broad
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strategy consisted of having a wide variety of clients, including individuals, intermediated through institutional investors, who would be registered as FIIs in India. FIIs are eligible to purchase shares and convertible debentures issued by Indian companies under the Portfolio Investment Scheme.

Prohibitions on Investments: FIIs are not permitted to invest in equity issued by an Asset Reconstruction Company. They are also not allowed to invest in any company which is engaged or proposes to engage in the following activities:

1) Business of chit fund 2) Nidhi Company 3) Agricultural or plantation activities 4) Real estate business or construction of farm houses (real estate business does not include development of townships, construction of residential/commercial premises, roads or bridges). 5) Trading in Transferable Development Rights (TDRs).

Trends of Foreign Institutional Investments in India.

Portfolio investments in India include investments in American Depository Receipts (ADRs)/ Global Depository Receipts (GDRs), Foreign Institutional Investments and investments in offshore funds. Before 1992, only Non-Resident Indians (NRIs) and Overseas Corporate Bodies were allowed to undertake portfolio investments in India. Thereafter, the Indian stock markets were opened up for direct participation by FIIs. They were allowed to invest in all the securities traded on the primary and the secondary market including the equity and other securities/instruments of companies listed/to be listed on stock exchanges in India. It can be observed from the table below that India is one of the preferred investment destinations for FIIs over the years. As of March 2009, there were 1609 FIIs registered with SEBI.

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SEBI REGISTERED FIIS IN INDIA Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 End of March 0 3 156 353 439 496 450 506 527 490 502 540 685 882 996 1279 1609

2011-12

1805

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FII TREND IN INDIA Year Gross Purchases (a) (Rs. crore) Gross Sales (b) (Rs.crore) Net % increase in

Investment (a- FII inflow b) (Rs. crore)

1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

17 5593 7631 9694 15554 18695 16115 56856 74051 49920 47061 144858 16953 346978 520508 896686 548876 -

4 466 2835 2752 6979 12737 17699 46734 64116 41165 44373 99094 171072 305512 489667 844504 594608 -

13 5127 4796 6942 8575 5958 1584 10122 9935 8755 2688 45764 45881 41466 30841 52182 -45732 -

39338.46 -6.45 44.75 23.52 -30.52 126.59 739.02 -1.85 -11.88 69.30 1602.53 0.26 -9.62 -25.62 69.20 187.64 -

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There may be many other factors on which a foreign direct investment may depend i.e. Government policies, budgets, bullion market, inflation, economic and political condition of the country, FDI, Re./Dollar exchange rate etc. But for my study I have selected only one independent variable i.e. FII and dependent variable is indices of nifty.

CO RELATION WITH INDICES

Indices Sensex Bankex Power IT Capital Goods

Co-relation with FII 0.80 0.18 0.33 0.13 0.44

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From the above table we can say that FII has a positive impact on all the indices which means that if FIIs come in India then it is goods for the Indian economy. FIIs have more co-relation with Sensex so we can say that they are mostly invest in big and reputed companies which are included in Sensex. Power and Capital Goods sector have more co-relation with FII investment which shows more interest of FIIs in those sectors. FDI V/S FII Both FDI and FII are related to investment in a foreign country. FDI or Foreign Direct Investment is an investment that a parent company makes in a foreign country. On the contrary, FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign nation. In FII, the companies only need to get registered in the stock exchange to make investments. But FDI is quite different from it as they invest in a foreign nation. The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it back. But in Foreign Direct Investment, this is not possible. In simple words, FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to choose FDIs more than then FIIs. FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole economy. specific enterprise. It aims to increase the enterprises capacity or productivity or change its management control. In an FDI, the capital inflow is translated into additional production. The FII investment flows only into the secondary market. It helps in increasing capital availability in general rather than enhancing the capital of a specific enterprise. The Foreign Direct Investment is considered to be more stable than Foreign Institutional Investor. FDI not only brings in capital but also helps in good governance practices and better management skills and even technology transfer. Though the Foreign Institutional Investor helps in promoting good governance and improving accounting, it does not come out with any other benefits of the FDI. While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term investments, the FDIs are long term.

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FINDINGS A large number of changes that were introduced in the countrys regulatory economic policies heralded the liberalization era of the FDI policy regime in India and brought about a structural breakthrough in the volume of the FDI inflows into the economy maintained a fluctuating and unsteady trend during the study period. It might be of interest to note that more than 50% of the total FDI inflows received by India , came from Mauritius, Singapore and the USA. The main reason for higher levels of investment from Mauritius was that the fact that India entered into a double taxation avoidance agreement (DTAA) with Mauritius were protected from taxation in India. Among the different sectors, the service sector had received the larger proportion followed by computer software and hardware sector and telecommunication sector. According to findings and results, we have concluded that FII did have significant impact on Sensex but there is less co-relation with Bankex and IT. One of the reasons for high degree of any linear relation can also be due to the sample data. The data was taken on monthly basis. The data on daily basis can give more positive results (may be). Also FII is not the only factor affecting the stock indices. There are other major factors that influence the bourses in the stock market.

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SUGGESTIONS Foreign direct investment (FDI) plays an extraordinary and growing role in global business. It can provide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. For a host country or the foreign firm which receives the investment, it can provide a source of new technologies, capital, processes, products, organizational technologies and management skills, and as such can provide a strong impetus to economic development. Foreign direct investment, in its classic definition, is

defined as a company from one country making a physical investment into building a factory in another country. The direct investment in buildings, machinery and equipment is in contrast with making a portfolio investment, which is considered an indirect investment. In recent years, given rapid growth and change in global investment patterns, the definition has been broadened to include the acquisition of a lasting management interest in a company or enterprise outside the investing firms home country. As such, it may take many forms, such as a direct acquisition of a foreign firm, construction of a facility, or investment in a joint venture or strategic alliance with a local firm with attendant input of technology, licensing of intellectual property, in the past

decade, FDI has come to play a major role in the internationalization of business. Reacting to changes in technology, growing liberalization of the national regulatory framework governing investment in enterprises, and changes in capital markets profound changes have occurred in the size, scope and methods of FDI. New information technology systems, decline in global communication costs have made management of foreign investments far easier than in the past. The sea change in trade and investment policies and the regulatory environment globally in the past decade, including trade policy and tariff liberalization, easing of restrictions on foreign investment and acquisition in many nations, and the deregulation and privatization of many industries, has probably been the most significant catalyst for FDIs expanded.

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CONCLUSION Foreign direct investment is a type of investment in which an individual or group puts money directly into a business in a foreign country. This type of investment could potentially be done in any market, but many investors are turning to emerging markets as a way to increase returns on investment. Emerging markets are countries or regions that have been underdeveloped and are beginning to develop economically. Foreign direct investment involves investing in at least 10 percent of the ownership of a company in a foreign country. Many times, investors also take on a management role in the foreign company. Direct investment is a different process than investing in a company through a fund or a stock exchange. This type of investment includes providing expertise, technology or some other benefit for the company. Emerging markets are quickly becoming a favorite of international investors. These markets are comprised of countries that have, up until this point, been undeveloped. These countries may not have the necessary infrastructure to be legitimate economic powers. As populations increase, more of these countries are starting to become developed. Investors can put money into these markets and potentially make large returns on their investments. So many different industries and sectors are growing in these markets that it can bring investors very large returns. Foreign direct investment gives you the benefit of diversifying your investments. Instead of having all of your money in one single market, you will have some of it spread out over multiple economies. This way, even if one economy performs poorly, you still have your foreign investments to bring your portfolio up. This type of investment also carries with it a large reward potential. Returns in these types of investments tend to be much higher than what you get from a developed country. Although this type of investment can be beneficial, it carries risks as well. There is always the chance that you could choose a market that is not truly on the path to emerging quickly. The market may be 20 years away from emerging, and you might have invested too early. Some of these areas may still be unstable politically, and this can have a negative impact on your investment opportunity overall. Choosing an emerging market in which to invest requires a great deal of research. An investor can benefit from working with an expert who is familiar with the target market. Working in conjunction with an investment company or a domestic company that is looking to expand can be a safer path to investing in an emerging market.

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BOOKS: 1. Apte P.G., International Finance, 2008, 2nd Ed. McGraw Hill. 2. Eun C.S., Resnick B.G., International Financial Management, 2010, Tata McGraw Hill Education Pvt. Ltd., 4th Ed. Special Indian Edition. 3. Levi M., International Finance, 2009, 5th Ed. Routledge, Taylor & Francis Group.5. 4. Madura J., International Financial Management, 2010, 4th Ed. Cengage Learning. 5. Sharan V., International Financial Management, 2009, 5th Ed. PHI, EEE.

WEBSITES: http://www.ehow.com/about_7378614_foreign-direct-investment-emerging-markets.html http://www.ibef.org/artdispview.aspx?in=23&art_id=30963&cat_id=412&page=2 http://www.ibef.org/india/economy/fdi.aspx http://business.mapsofindia.com/fdi-india/advantages.html http://www.indiahousing.com/fdi-foreign-direct-investment.html http://finance.indiamart.com/investment_in_india/fdi.html http://www.answers.com/topic/foreign-direct-investment#History http://www.unctad.org/sections/dite_iiab/docs/diteiiab20041_en.pdf http://www.economywatch.com/foreign-direct-investment/ http://www.legalserviceindia.com/articles/fdi_india.htm

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