What is a Foreign Institutional Investor (FII)?

An FII is an institution established or incorporated outside a country, which invests foreign capital in the financial assets (like stocks, bonds) of that particular country.

What types of entities are considered FIIs?

Common FIIs include foreign pension funds, mutual funds, hedge funds, sovereign wealth funds, insurance companies, and investment banks.

Why are FII investments important for a country's economy?

FII investments bring foreign capital, boosting liquidity in financial markets, potentially lowering the cost of capital, financing infrastructure, and contributing to economic growth and development.

How do FIIs impact stock markets?

FIIs significantly influence stock market trends. Large inflows can drive up equity prices and market indices, while substantial outflows often lead to market downturns and increased volatility.

What is the key difference between FII and Foreign Direct Investment (FDI)?

FII typically involves portfolio investment in publicly traded securities without management control. FDI involves direct investment in productive assets, often establishing or acquiring businesses, with the intent of gaining control or a significant stake.