For currency i could understand because FIIs need to buy Rs and sell their respective currency so Rs will appreciate.
I understand secondary market is a virtual platform where traders benefit, how will companies listing securities there will get benefited if the capital flows in secondary market, which will boost the economy?
Got it. When FII (now called FPIs) invest in secondary markets, where they buy shares of listed companies it is as good as anybody buying shares. Companies do not benefit by this transaction. However it can send out a positive signal about the prospects of the company in which they have invested in.
As Karthik sir said, FII’s investment in secondary market will not benefit the company. They make investments only in those companies whose profits / future growth of the company is certain with certain criteria like the current projects they are working on / cash flows etc.
For eg:- Ultra tech cement bought Jaiprakash cements, if the given transaction/deal will result in bagging new projects / increase in profits / company expansion / production etc. So on these assumption or the facts when FII invests in either of the company, it gives signal in the secondary market to the investors that the share prices of these companies will go up or the earned profits will be distributed to investors in any form of divided like bonus, cash dividend etc.
In a nutshell its kind of spreading a good progress of that company by way of investments.are you asking about the benefits of IPOs?
Nope.
Let me explain,
Say a FII invest in Primary market, It will reach the company, which lists their share. Company will employ it in different projects, which will improve productivity, employment, etc. Besides it will boost currency because FIIs will buy rupee.
But How FII inflow will boost economy, when they invest in secondary market. To some extent it will boost currency but economy?
The inflows in secondary market wont reach company, right? Investors will benefit, how companies will benefit?