FIIs or Foreign Institutional Investors refers to institutions outside India which proposes investment in Indian securities. It includes investment from companies such as mutual funds, investment banks, etc. which invest large amounts in the markets. These companies cast a strong influence on the inflow in an economy. They buy securities that eventually help the market move upward.
As of now, the Security and Exchange Board of India (SEBI) has registered more than 1450 Foreign Institutional Investors (FIIs) with it.
Registration as FII
The following foreign entities are eligible for getting registered as FII:
* Banks
* Foreign Central Banks
* Mutual Funds
* Sovereign Wealth Funds
* Foreign Governmental Agencies
* Pension Funds
* Investment Trusts
* Insurance or Reinsurance Companies
* Foundations
* University Funds
* International or Multilateral Organizations or Agencies
* Endowments
* Charitable Societies or Trusts
Investments by FII
Foreign Institutional Investors (FIIs) can invest in the following:
* Dated Government Securities
* Indian depositary receipts
* Security receipts
* Rupee denominated units or bonds issued by the infrastructure debt funds
* Commercial papers on Indian Companies
* Other instruments that are specified by the Board
* Credit enhanced bonds that are Rupee denominated
* Derivatives that are traded on an acknowledged Stock Exchange
* Non-convertible bonds or debentures
* Unlisted and listed non-convertible bonds and debentures
* Commercial papers of the Indian companies
* Securities in the secondary and primary markets
Role of FII in an Economy
FII Investments plays a very important role in the economy of India. These investments act as a trigger as well as a catalyst for the performance of the market. They encourage investments from every class of investors. This leads to growth in the financial market.
FII plays an essential role in the stock markets and helps in causing volatility in the market. They provide value-based trading and liquidity. FII largely impacts the domestic financial markets such as money markets, stock markets and foreign exchange markets.