Foreign institutional investors (FIIs)
Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different country other than that where these organizations are based. Foreign institutional investors play a very important role in any economy. These are the big companies such as investment banks, mutual funds etc., who invest a considerable amount of money in the Indian markets. With the buying of securities by these big players, markets tend to move upward and vice-versa. They exert a strong influence on the total inflows coming into the economy. Market regulator SEBI has over 1450 foreign institutional investors registered with it. The FIIs are considered as both a trigger and a catalyst for the market performance by encouraging investment from all classes of investors which further leads to growth in financial market trends under a self-organized system.
Foreign Portfolio/Institutional Investors (FPI/FII) have been one of the biggest drivers of India’s financial markets and have invested around Rs 12.51 trillion (US$ 171.81 billion) in India between FY02-18. Highly developed primary and secondary markets have attracted FIIs/FPIs to the country. Investments by FIIs/FPIs in India are regulated by the Securities and Exchange Board of India (SEBI) while the ceilings on such investments are maintained by the Reserve Bank of India (RBI). Following are the few types of FIIs investing in India: Hedge Funds, Foreign Mutual Funds, Sovereign Wealth Funds, Pension Funds, Trusts, Asset Management Companies, and Endowments, University Funds, etc. The total market capitalization (M-cap) of all the companies listed on the Bombay Stock Exchange (BSE) rose to a record high level of Rs 142.25 trillion (US$ 1.95 trillion) in 2017-18.
Foreign Portfolio/Institutional Investors (FPI/FII) have been one of the biggest drivers of India’s financial markets and have invested around Rs 12.51 trillion (US$ 171.81 billion) in India between FY02-18. Highly developed primary and secondary markets have attracted FIIs/FPIs to the country. Investments by FIIs/FPIs in India are regulated by the Securities and Exchange Board of India (SEBI) while the ceilings on such investments are maintained by the Reserve Bank of India (RBI). Following are the few types of FIIs investing in India: Hedge Funds, Foreign Mutual Funds, Sovereign Wealth Funds, Pension Funds, Trusts, Asset Management Companies, and Endowments, University Funds, etc. The total market capitalization (M-cap) of all the companies listed on the Bombay Stock Exchange (BSE) rose to a record high level of Rs 142.25 trillion (US$ 1.95 trillion) in 2017-18.
Foreign Direct Investment (FDI)
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control. The origin of the investment does not impact the definition, as an FDI: the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding the operations of an existing business in that country. Foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.
Foreign direct investments are commonly categorized as being horizontal, vertical or conglomerate.
A horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it operates in its home country, for example, a cell phone provider based in the United States opening stores in China.
A vertical investment is one in which different but related business activities from the investor's main business are established or acquired in a foreign country, such as when a manufacturing company acquires an interest in a foreign company that supplies parts or raw materials required for the manufacturing company to make its products.
A conglomerate type of foreign direct investment is one where a company or individual makes foreign investment in a business that is unrelated to its existing business in its home country. Since this type of investment involves entering an industry in which the investor has no previous experience, it often takes the form of a joint venture with a foreign company already operating in the industry.
Foreign direct investments are commonly categorized as being horizontal, vertical or conglomerate.
A horizontal direct investment refers to the investor establishing the same type of business operation in a foreign country as it operates in its home country, for example, a cell phone provider based in the United States opening stores in China.
A vertical investment is one in which different but related business activities from the investor's main business are established or acquired in a foreign country, such as when a manufacturing company acquires an interest in a foreign company that supplies parts or raw materials required for the manufacturing company to make its products.
A conglomerate type of foreign direct investment is one where a company or individual makes foreign investment in a business that is unrelated to its existing business in its home country. Since this type of investment involves entering an industry in which the investor has no previous experience, it often takes the form of a joint venture with a foreign company already operating in the industry.
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