FII and QFI

Foreign institutional investor- 

any foreign player can invest money in stock market. The foreigners have to open a sub account with already registered FII ( eg. Maxwell Assets Manager, BNP PARIBAS, MORGAN STANLEY) with the SEBI.

invest a minimum net worth of $50 million (about Rs. 260 crore) to get a license from SEBI.

note- investment under FII are very vulnerable as a slight change in the market result in the out flow of investment from the country and datsy it is called as HOT MONEY- was responsible for 1997 Asian financial crisis.

QUALIFIED FOREIGN INVESTORS

It means a foreign individual, group or foreign firm can directly invest in Indian stock-market like any normal Indian citizen, without requiring the sub-account with FII. This should bring in some more investors, who’re interested in investing in India but feel turned off because of this sub-account and strict High Net-worth rules.

Requirements for QFI

1. DEMAT account
2.trade account with a depository participants.

what is demat account?

When you purchase shares, you don’t get paper certificates, but those shares get electronically transferred to your demat account in the Depositary. Meaning your shares are not in physical paper (material) form but electronic format. De-materializied= De-mat. No fear of theft, misplacement, delay in transfer etc.

what is depository?

A Depository is like a bank locker where securities (shares) are held in electronic (dematerialised) form.
In India, there are only two Depositories -National Securities Depositories Limited (NSDL) and Central Depository Services Limited (CDSL).

What is Depository Participants (DP)?

DP’s are like bank branches where shares in physical (paper) form need are deposited for converting them in electronic (demat) form and email it to the Depositary.
Examples of Depository Participants (DP) :ICICI, SBI, HDFC etc. You’ve to open a Demat Account with any one DP.

 important points

• QFI is an individual, group or association resident in a foreign country that adheres to anti-money laundering and anti-terrorist financing guidelines as defined by the financial action task force (FATF), a multi-lateral body.
• The QFIs do not include FII/sub-accounts.
• QFIs can own up to 5% of Indian companies while their cumulative investments are capped at 10%. These limits are over and above the FII and NRI investment ceilings prescribed under the portfolio investment route for foreign investment in India
• The QFIs shall be allowed to invest through the SEBI-registered Qualified Depository Participant (DP), with the QFI required to open only one demat account and a trading account with any of the qualified DP and make purchase and sale of equities (shares) through that DP only.

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