 Presented By: Roll Numbers

 Dhawal Ambani 02
 Gaurang Bharkhada 04
 Kiran Bhilare 06
 Sanjog Devrukhkar 11
 Pradip Malick 50

 Presented To:
Ms. Pooja Dave

(MFM Semester – III / Group – IV)

 Global Financial Market
 Stock Exchange
 Indian Financial Market
 IMF –SDR
 Hedge Fund
 Present FDI In India
 Theglobal financial system (GFS) is a
financial system consisting of institution and
regulators that act on the international
level, as opposed to those that act on a
national or regional level.

 Themain players are the global institutions,

such as International Monetary Fund and
Bank of International Settlements, national
agencies and government departments, e.g.,
central banks and finance ministries, and
private institutions acting on the global scale
 No geographical boundaries
 24 hrs active market
 Provides liquidity to various currency
 It transfer purchasing power from one
currency to another currency
1) International institutions
The most prominent international institutions are the IMF,
World Bank and the WTO

2) Government institutions
Governments act in various ways as actors in the GFS: they pass
the laws and regulations for financial markets and set the tax
burden for private players
They are also regulate the central banks that issue
government debt, set interest rates and deposit requirements,
and intervene in the foreign exchange market.

3) Private participants
Players acting in the stock, bond , foreign exchange ,
derivatives and commodities markets and investment banking
are Commercial Banks, Hedge funds & Private Equity, Pension
funds.
The financial markets can be divided into different subtypes: -

 Capital Markets which consist of:

– Stock market, which provide financing through the issuance of
shares
– Bond markets, which provide financing through the issuance of
bonds
 Commodity markets, which facilitate the trading of
commodities.
 Money markets, which provide short term debt financing and
investment.
 Derivatives markets, which provide instruments for the
management of financial risk.
 Insurance markets, which facilitate the redistribution of
various risks.
 Foreign exchange markets, which facilitate the trading of
foreign exchange.
 The raising of long term and short term
capital (through capital markets & money
market).
 The transfer of risk (through derivatives
markets).
 Facilitate International trade (through
currency markets).
A stock exchange play a very important role
in global financial market.
 A stock exchange is a corporation or mutual
organization which provides "trading"
facilities for stock brokers and traders, to
trade stocks and other securities
 In today world, modern markets are
connected through electronic networks,
(screen base trading) which gives them
advantages of speed and cost of transactions.
 Raising capital for businesses
 Mobilizing savings for investment
 Facilitating company growth
 Profit sharing
 Corporate governance
 Creating investment opportunities for small
investors
 Government capital-raising for development
projects
 Barometer of the economy
List of following product are traded on across
the stock exchange globally.
 Stock Future
 Commodity Future (Agro & metal commodity)
 Currency Future
 Corporate Bond
 Government Bond
 Energy Trading
 Market Capitalization of few Global
markets as on Aug 2009
Region Stock Exchange Market Value Total Share
(millions USD) Turnover
(millions USD)
Africa Johannesburg Securities Exchange 690,797.50 210,180.80
Americas NASDAQ 2,847,535.20 19,343,868.30
Americas São Paulo Stock Exchange 1,032,518.40 361,959.00
Americas Toronto Stock Exchange 1,432,877.00 798,193.10
Americas New York Stock Exchange 10,842,001.90 12,158,620.60
Asia-Pacific Australian Securities Exchange 1,066,513.20 560,912.80
Asia-Pacific Bombay Stock Exchange 1,082,572.00 171,176.20
Asia-Pacific Hong Kong Stock Exchange 1,945,517.70 970,227.60
Asia-Pacific Korea Exchange 727,125.30 1,050,473.80
Asia-Pacific National Stock Exchange of India 1,019,109.00 506,652.30
Asia-Pacific Shanghai Stock Exchange 2,142,756.80 3,315,768.50
Asia-Pacific Shenzhen Stock Exchange 596,320.20 1,701,256.80
Asia-Pacific Tokyo Stock Exchange 3,478,602.50 2,675,983.30
Europe Euronext 2,605,097.60 1,195,962.20
Europe Frankfurt Stock Exchange (Deutsche Börse) 1,204,292.00 1,589,736.70
Europe London Stock Exchange 2,560,491.10 2,321,518.50
Europe Madrid Stock Exchange) 1,178,525.60 1,040,751.10
Europe Milan Stock Exchange (Borsa Italiana) 636,674.80 565,759.30
Europe Nordic Stock Exchange Group OMX1 781,146.30 503,049.90
Europe Swiss Exchange 992,356.40 520,867.50
Participants & there basis of objectives:
 Investor – Invest in equity market
 Hedgers – Hedge the portfolio
 Arbitrageurs – Play with the price
difference
 Speculators – Play with the market
volatility
 Indian
Financial
Markets

MONEY DEBT FOREX EQUITY

MARKET MARKET MARKET MARKET

INTEREST
RATE FORWARD/
CASH G-SECS CORP BONDS SPOT CASH DERIVATIVES
DERIVATIVES DERIVATIVES
(IRS/FRAs)

Call Money Central Govt

INDEX
FUTURES
Term Money State Govt.
INDEX
Repos OPTIONS

CBLO STOCK
FUTURES
T-Bills STOCK
OPTIONS
CPs/CDs
 REGULATORS

SEBI RBI FMC IRDAI PFRDA

CORPORATE
FIXED
BOND EQUITY / FOREIGN COMMODITY INSURANCE PENSION
INCOME
MARKET DERIVATIVES EXCHANGE MARKET COMPANIES FUNDS
MARKET
 NSE and the Bombay Stock Exchange are the two most
significant stock exchanges in India, and between them are
responsible for the vast majority of share transactions.
 It is the largest stock exchange in India in terms of daily
turnover and number of trades, for both equities and derivative
trading
 NSE has a market capitalization of around Rs 47,01,923 crore (7
August 2009)
 NSE is the third largest Stock Exchange in the world in terms of
the number of trades in equities
 NSE is mutually-owned by a set of leading financial institutions,
banks, insurance companies and other financial intermediaries
in India
 Cash  Futures
 Equity  Index
 Debentures  Stock
 Interest Rate
 Warrants
 ETFs
 Options
 Index
 Wholesale Debt Market
 Stock
 Govt. Securities
 T-Bills etc.  Currency Futures
 USINR Future
 Equity
Yearly Net
Gross Purchases Gross Sales
Base Investments (Rs. Cr)
(Rs. Cr) (Rs. Cr)

2008 721606.50 774593.40 -52986.90

2007 811371.60 741314.40 70057.20

2006 475181.60 438788.50 36393.10

2005 284354.10 237642.20 46711.90

2004 186416.50 147627.20 38789.30

2003 94122.20 63385.10 30737.10

2002 46854.10 43272.80 3581.30
2001 51848.50 38304.80 13514.30
2000 74791.50 68421.60 6370.50
1999 36395.50 29817.10 6578.10
 Equity
Net
Current Year Gross Purchase
Gross Sales Investments
(Rs. Cr)
(Rs. Cr) (Rs. Cr)
2009 - Oct 39814.60 32933.10 6881.50

2009 - Sep 67870.90 49526.50 18344.40

2009 - Aug 52385.80 47483.30 4902.50

2009 - Jul 70128.70 59062.10 11066.60

2009 - Jun 67277.20 63447.00 3830.20

2009 - May 74776.50 54659.10 20117.40

2009 - Apr 39653.30 33145.10 6508.20

2009 - Mar 32377.40 31847.30 530.10

2009 - Feb 21341.10 23777.90 -2436.80

2009 - Jan 27874.00 32119.10 -4245.10

MF activity in Financial Markets
Equity
Yearly Base Gross Purchases Gross Sales Net Investments
(Rs. Cr) (Rs. Cr) (Rs. Cr)
2008 180792.70 166800.30 13992.40

2007 183818.21 177623.15 6195.06

2006 136011.99 120787.25 15224.74

2005 79525.00 66257.87 13267.13

2004 42327.66 43294.15 -966.49

2003 28579.80 27950.51 629.29

2002 15202.80 18093.45 -2890.65

2001 3596.16 4333.21 -737.05

 Equity
Current Gross Gross Net
Year Purchases Sales Invest.
(Rs. Cr) (Rs. Cr) (Rs. Cr)
2009 - Oct 6426.90 9115.20 -2688.30
2009 - Sep 15852.10 18186.60 -2334.50
2009 - Aug 17451.50 16880.90 570.60
2009 - Jul 22549.00 20728.20 1820.80
2009 - Jun 22215.10 21376.00 839.10
2009 - May 18956.80 16665.90 2290.90
2009 - Apr 12138.00 12100.20 37.80
2009 - Mar 11723.60 10245.80 1477.80
2009 - Feb 6063.30 7559.30 -1496.00
2009 - Jan 10249.60 11114.50 -864.90
 The International Monetary Fund was created in
July 1944, originally with 45 members. At
present 186 are member country.
 The IMF is governed by its member countries,
through the Board of Governors, which consists
of one governor from each member country.
 Promote global financial stability
 Exchange Rate Stability
 Temporary financial assistance to members
experiencing balance of payments difficulties
 Economic growth and high levels of
employment
 IMF’s capital base consists of membership quotas,
the financial contributions made by the member
countries. Total quotas amount to almost $300
billion.

 Members’ quotas are broadly determined by their

economic position relative to other members, and
are reviewed on a regular basis.

 A country’s quota determines its voting power and

access to financing.

 SDRs are allocated to member countries in

proportion to their IMF quotas.
 Special Drawing Rights (SDRs) are the freely
usable currencies of International Monetary Fund
members.
 SDRs are defined in terms of a basket of major
currencies used in international trade and
finance.
 At present, the currencies in the basket are, by
weight, the United States dollar, the euro, the
Japanese yen, and the pound sterling.
 The determination of the currencies in the SDR
basket and their amounts is made by the IMF
Executive Board every five years.
Period USD DEM FRF JPY GBP
1981–1985 0.540 (42%) 0.460 (19%) 0.740 (13%) 34.0 (13%) 0.0710 (13%)

1986–1990 0.452 (42%) 0.527 (19%) 1.020 (12%) 33.4 (15%) 0.0893 (12%)

1991–1995 0.572 (40%) 0.453 (21%) 0.800 (11%) 31.8 (17%) 0.0812 (11%)

1996–1998 0.582 (39%) 0.446 (21%) 0.813 (11%) 27.2 (18%) 0.1050 (11%)

Period USD EUR JPY GBP

1999–2000 0.5820 (39%) 0.3519 (32%) 27.2 (18%) 0.1050 (11%)
2001–2005 0.5770 (45%) 0.4260 (29%) 21.0 (15%) 0.0984 (11%)
2006–2010 0.6320 (44%) 0.4100 (34%) 18.4 (11%) 0.0903 (11%)
A hedge fund is an investment fund open to a
limited range of investors that is permitted by
regulators to undertake a wider range of
investment and trading activities than other
investment funds.
 Every hedge fund has its own investment strategy
that determines the type of investments and the
methods of investment it undertakes.
 Hedge funds, invest in a broad range of
investments including shares, debt and
commodities.
 It originated first in US.
 It started in the year 1949.
 Dr. Alfred Winslow Jones was the founder.
 A.W. Jones and Co a partnership firm was created with
four friends.
 Investment was $ 100,000 in stocks.
 A lot of trading desks and commodity-trading advisors
began converting themselves into hedge funds.
 Securities and Exchange Commission in 1968 counted 140
investment partnerships as hedge funds.
 Hedge Fund industry may have managed
around $2.5 trillion.
 Most hedge funds are highly specialized.
 Highly unregulated.
 Hedge fund manager are highly professional,
disciplined.
 Professional investors, Wealthy investors,
arbitragers etc are parties to hedge funds.
 Mutual Funds Hedge Funds
 Highly Regulated  Largely Unregulated
 NAV is calculated daily  NAV is calculated on
and reported to investors daily bases but reported
on daily bases. to investors on monthly
 Large number of owners. bases.
 Very few high net worth
 Remunerate
individuals and
management based on
institutions are the
% of asset under
owners.
management
 Remunerate managers
with performance related
incentive fees as well as
fixed fees.
Yes – Only accredited investor can invest.
Conditions to be fulfilled
 Individual or combined net worth of
$1million.
 Individual income of more than $200,000 in
the previous 2 yrs.
 The combined income of you and your spouse
is more that $300,000.
 Ability to generate positive returns in both
rising and falling markets (bond & Equity).
 It reduces risk & volatility and provides
increased returns.
 It provides ideal long term investment
solutions.
 It provides diversification.
 High Leverage
 Short selling
 Lack of transparency
 Lack of regulation
 Less Liquidity
 Investment Management fees may be relatively
high for Hedge Funds
Hedge funds employ many different
trading strategies, which are classified in many
different ways, with no standard system used.

 Style: global macro, directional, event-driven

 Market: equity, fixed income, commodity,
currency
 Instrument: long/short, futures, options, swaps
 Sector: emerging market, technology, healthcare
etc.
 Diversification: multi-manager, multi-strategy,
multi-fund, multi-market
 Amaranth Advisors
 Bridgewater Associates
 Citadel Investment Group
 D.E. Shaw
 Fortress Investment Group
 GLG Partners
 Long-Term Capital Management
 Man Group
 Marshall Wace
 Renaissance Technologies
 Soros Fund Management
 The Children's Investment Fund Management (TCI)
 Amaranth Advisors LLC was an American
multistrategy hedge fund managing US$9
billion in assets.
 In September 2006, it collapsed after losing
roughly US$6 billion on natural gas futures.
 The failure was one of the largest known
trading losses and hedge fund collapses in
history.
 Long-Term Capital Management (LTCM) was
a U.S. hedge fund which used trading
strategies such as fixed income arbitrage,
statistical arbitrage, and combined with high
leverage.
 Initially enormously successful with
annualized returns of over 40% (after fees) in
its first years.
 In 1998 it lost $4.6 billion in less than four
months following the Russian financial crisis
 Investment In India by
Foreigners

Foreign Direct
Portfolio Investment
Investment

Automatic Approval Through

Route – Route – the
Through Through prescribe
RBI FIPB limit of RBI
 Foreign direct investment is investment of
foreign assets into domestic structures,
equipment, and organizations.
 FDI refers to investment in a foreign country
where the investor retains control over the
investment
Who is a FII?
 Anentity established or incorporated outside India,
which proposes to make investment in India.
Who can get registered as an FII?
 Pension funds
 Mutual funds
 Investment trusts
 Insurance or Reinsurance companies
 Endowment funds
 University funds
 Foundations or Charitable trusts
 Overseas investment advisors
 International or multilateral agencies, Foreign governmental
agency or a Foreign central bank
 Asset management companies, Institutional portfolio managers,
Trustees etc.
A – Cumulative FDI equity inflows (1991-2009)

B – FDI equity inflows during financial Year 2009-2010

Financial Year 2009-2010 Amount of FDI inflows

(April - March) (In Rs. Crore) (In US $ mm)

April 2009 11,708 2,339

May 2009 10,168 2,095
June 2009 12,335 2,582
July 2009 16,852 3,476
Total 51,063 10,492
C – Share of top investing counties FDI equity
inflows (financial year wise)
Amount Rupees in Crores (US $ in million)

2009-2010 Cumulative % to total

Rank Country (April-March) inflows (April inflows in
00 to July 09) terms of
rupees
1 Mauritius 22,257 1,83,529 44 %
(4,555) (41,419)
2 Singapore 3,692 37,544 9%
(759) (8,570)
3 U.S.A. 4,261 32,220 8%
(886) (7,221)
4 U.K. 542 23,446 6%
(112) (5,338)
5 Netherlands 1,334 17,187 4%
(278) (3,866)
Total 51,062 4,20,146
(10,492) (94,947)
 According to DTAA signed by India, a large number of
Foreign Institutional Investors who trade on the
Indian stock markets operate from Mauritius.
 According to the tax treaty between India and
Mauritius, Capital Gains arising from the sale of
shares is taxable in the country of residence of the
shareholder and not in the country of residence of
the Company whose shares have been sold.
 Therefore, a company resident in Mauritius selling
shares of an Indian company will not pay tax in India.
Since there is no Capital gains tax in Mauritius, the
gain will escape tax altogether.
 India has a tax treaty with Mauritius
providing that gains on any transfer of shares
in an Indian company by the Mauritius
holding company shall not be taxable in India
but in Mauritius as per the domestic tax laws
in Mauritius.
 Domestic tax laws in Mauritius do not tax
capital gains.
 Therefore, any transaction on account of the
transfer of shares in an Indian company by a
Mauritius holding company is a tax free
transaction both in India and Mauritius.
http://en.wikipedia.org/wiki/Currency_sign
http://en.wikipedia.org/wiki/Amaranth_Advisors
http://en.wikipedia.org/wiki/Hedge_fund
http://en.wikipedia.org/wiki/The_Children%27s_Investment_Fund_Management
http://en.wikipedia.org/wiki/Global_financial_system
www.google.com
Thank You!