Free-float Methodology makes the index more broad-based by reducing the concentration of top few companies in Index. Today, FIIs are permitted to invest in all securities traded on the primary and secondary markets, including equity shares and other securities listed or to be listed on the stock exchanges.
On the earnings front, we saw rural income taking a hit, visible in tractor sales volume. On the other hand, the FIIs say that India is competing with other capital markets, and in most cases no capital gains are payable.
Preferential allotment also can be made to FIIs subject to ceilings and fulfilment of certain conditions including price norms.
A Free-float index aids both active and passive investing styles. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.
BSE Calculation Methodology SENSEX is calculated using the 'Free-float Market Capitalization' methodology, wherein, the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. The provisions of Avoidance of Double Taxation Agreement will be applicable.
There are however some restrictions. Hence, it is always cash settled.
Exceptions can be made for extreme reasons like scrip suspension etc. Forward exchange cover can be provided to FIIs by authorised dealers both in respect of equity and debt instruments, subject to prescribed guidelines. It was known from the beginning that FIIs were taking this route in order to take advantage of the treaty, and once a certificate of residency is issued y the Mauritius authorities, Indian tax authorities do not have any option but to accept this method of investing in India.
Shares in a company will have to be held for more than 12 months in order to qualify as a long-term capital asset. One argument of levying a tax is that domestic investors have to pay tax in the case of capital gains, which is now 10 per cent in the case of shares and units.
Impact on prices Along with the domestic mutual funds, the FIIs have started playing a critical role in the movement of stock prices.
Also, it has to take delivery of securities purchased and effect delivery of securities sold. However, under the Free-float Methodology, since only the free-float market capitalization of each company is considered for index calculation, it becomes possible to include such closely-held companies in the index while at the same time preventing their undue influence on the index movement.
The scrip should have a listing history of at least three months at BSE. Advice on infrastructure projects has been in high demand on the projects and energy side, with the renewable energy, railway and transport sectors particularly buoyant.
In other words, the market capitalization of each company in a free-float index is reduced to the extent of its readily available shares in the market.
The growth of the equity market in India has been phenomenal in the present decade. Individual ceilings will depend on the track record of the FII and its experience in managing debt funds in emerging markets.
Tax provisions The tax on interest payment on bonds held by FIIs is 20 per cent. Adverse impact on Exports: Other securities will have to be held for more than 36 months in order to qualify as a long-term capital asset.
The Indian rupee has plunged over 7 per cent to For example, under a Full-market capitalization methodology, companies with large market capitalization and low free-float cannot generally be included in the Index because they tend to distort the index by having an undue influence on the index movement.
Foreign brokers in India With a view to facilitating the operational procedures for foreign institutional investment in India and encouraging the present investment trends, it was decided to increase the role of foreign brokers in transactions of FIIs by allowing them to provide assistance to the FIIs registered with SEBI in their dealings in India.
The FIIs are playing an important role in bringing in funds needed by the equity market. Free-float Methodology improves index flexibility in terms of including any stock from the universe of listed stocks. Dividend on shares held by them is exempt after June 1, Here the underlying asset is the stock index.
Mauritius based residents, including FIIs, will not be taxed in respect of capital gains on sale of business provided they have a certificate of residency from that government.
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