Foreign Direct Investment (FDI) is defined as "investment made to acquire lasting interest in enterprises operating outside of the economy of the investor." The FDI relationship, consists of a parent enterprise and a foreign affiliate which together form a Trans-National Corporation (TNC).
India, post liberalization, has not only opened it's doors to foreign investors but also made investing easier for them by implementing the following measures:
- Foreign exchange controls have been eased on the account of trade.
- Companies can raise funds from overseas securities markets and now have considerable freedom to invest abroad for expanding global operations.
- Foreign investors can remit earnings from Indian operations.
- Foreign trade is largely free from regulations, and tariff levels have come down sharply in the last two years.
- While most Foreign Investments in India (up to 51 %) are allowed in most industries, foreign equity up to 100 % is encouraged in export-oriented units, depending on the merit of the proposal. In certain specified industries reserved for the small scale sector, foreign equity up to 24 % is being permitted now.
As the industry progresses, opportunities abound in India, which has the world's largest middle class population of over 300 million, is attracting foreign investors by assuring them good returns. The scope for foreign investment in India is unlimited. India offers to foreign investors a well balanced package of fiscal incentives for exports and industrial investments that includes:
- Complete tax exemptions.
- Investment incentives are offered by both the Central Government and the Government of the State in which the unit is located.
- India has tax treaties with 40 countries.
India Stock and Investment
The India stock and investment market is mainly divided into 2 parts, namely the capital market and the money market. The stock market is an important part of the capital market in the country through which one can carry out the transaction of capital. It is usually done through the means of direct financing through the use of security and investment. The investment market can further be sub divided into the primary and secondary market.
Features of the Primary market
In case of the primary market, the listed shares are traded for the first time which is transferred to the investors from the listed company. In case of the primary market, the stock issuers and the listed companies make use of the capital by offering the stocks to the investors. The investors, in turn, buy the shares and supply the needed capital. In simple terms, the primary market is a type of platform where new securities and stocks are dealt with.
The primary market can be an ideal source of funding for various business enterprises and companies, public sector units and government organizations. All these organizations can make the funding by selling new bonds, stocks and other forms of securities. The buying and selling of the securities are done through dealers. The processes through which the new securities are sold to the investors are referred to as underwriting. On the other hand, if any new stock is issued to the investor, it is known as initial public offering (IPO). In most cases, the dealers who carry out the process get a sum of money in the form of a commission. The terms and conditions of the commission are based on the price offering of the securities.
Features of secondary market
An important part of the India stock and investment market is the secondary market. In simple terms, it is also known as the stock market. Mainly it is a type of continuous market which offers a very good platform for trading and business of securities and stocks. In most cases, the trading is done through a licensed broker, stock and securities units, security firms and other financial institutions. The trading has to be done according to the terms and conditions that are set by the specific stock exchanges.
There are two main stock exchanges in India which operate the bulk of the share and security trading. They are:
Bombay Stock Exchange:
The Bombay Stock Exchange (BSE), also known as the Stock Exchange, Mumbai is the oldest stock exchange in Asia and is credited with the operation of the most number of listed companies in the world. Incepted in the year 1875, it has a listing of more than 4,700 companies. It is located in the Dalal Street area of the city of Mumbai, the financial capital of India.
The BSE is owned by the Bombay Stock Exchange Limited and has a market cap amount of around US$ 1.1 trillion while the volume of the stock exchange is around US$ 980 billion. The currency type which is dealt in the BSE is Indian National Rupees (INR). The index on which the stock exchange operates is the BSE SENSEX, also referred to as the SENSitive indEX. The index is popularly known as BSE 30.
To cater to the customers, the Bombay Stock Exchange offers a number of facilities and services. They are:
- BSE Investor Services
- BSE On-line Trading (BOLT) process
- On-Line Surveillance System (BOSS)
- BSEWEBX.com, BSE online trading site
- BSE Training Institute for various certification programs
The BSE has also been awarded a number of prestigious awards for its service towards the economy of India. They are:
- The ICAI financial reporting award
- The Asia - Pacific HRM employer branding awards
- The Golden Peacock Global Corporate Social Responsibility (CSR) Award
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