Can anybody clarify???

We have been seeing FII money flowing into Indian markets to the tune of billions. ( for the past few days it is moving out, and that is different topic altogether).

My question is, if FII buy stocks (cash market buying) we say that money is entering into India and it is good for Indian economy. I heard we make day to day purchases (oil etc) only with that money nowadays.

I want to know what happens to the money FII's  make by trading in derivatives markets? Because the money the make in derivatives is more than enough to cover their cash market buying for the month, given the way they manipulate the Indian equity markets.

1. How that money is accounted for?
2. If they book the profit and take the money out of India, will it considered as money moving out of India?
3. Is there any control for such money like it should be invested in India again like that?
4. Will that not affect the currency exchange rate?