Top FIIs and FDIs in India: Every country needs funds to grow its economy. These funds might come from within the country or from outside of it. There are two ways by which a country can get funds from international sources: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
Foreign Institutional Investment (FII) forms a major chunk of FPI investment in India. The Indian economy opened for foreign investment in the year 1991 and has been attracting a lot of it since then. Therefore, we’re going to let you know about the top FIIs and FDIs in India and the stocks they love.
Table of Contents
What are FIIs and FDIs?
Foreign Institutional Investors (FIIs) can be individual investors, hedge funds, banks, mutual fund houses, infrastructure companies, etc. that invest in assets belonging to a country other than their own.
They invest in the markets of a foreign company. It is also known as ‘hot money since it increases the capital inflow of a country for the time being. FIIs tend to influence the market. When they buy, the market tends to go up, and when they sell, it tends to go down.
FDI is an investment that a parent company makes in another country with a view to taking controlling ownership in a foreign company and participating in the day to day business.
They invest in these countries because they see a strong potential for growth in them. When an FDI happens, the investor brings knowledge, skills and technical expertise along with the capital investment. Therefore they have a good hold in decision making.
An investment made by an investor in the markets of a foreign country.
A company makes an investment in a foreign company/ country.
Ease of entry and exit
FII is known as hot money. They can enter and exit the market easily.
FDIs cannot enter and exit the market easily.
Aim
This investment flows into the secondary market. They increase capital availability in general.
They target a particular company and aim to increase its productivity.
Term
These may be short-term investments.
They tend to be long-term investments.
Stability
They are less stable as they have ease of entry and exit.
They are more stable as investments cannot be made or withdrawn easily.
Transfer of
Funds only
Funds, capital, technology, strategies and more are bought.
Consequences
They increase the capital of the country,
They cause an increase in the country’s GDP.
Control over a company
No
Yes
What is the role of FIIs and FDIs in India?
Foreign Direct Investment (FDI) leads to long term growth of the economy. MNCs bring about technology transfer, provide employment opportunities and add to the assets of the company in which they are investing.
They cause an increase in per capita income, tax collections and the GDP as well. FDI is better than FII which is volatile in nature and moves to the stock market.
FIIs enhance the flow of capital in the country. They influence the market and cause an increase in demand for local currency and direct inflation. The value of the rupee tends to go up, as a result. Sometimes FIIs invest for the short term.
Therefore, regulatory authorities have put restrictions on the maximum amount that can be invested by them in a particular sector or company.
Though this increases the flow of money or liquidity in a market, it leads to instability in the flow of money. Other investors invest, if FII investments are increasing, which further leads to growth in the financial markets.
Now let us take a look at some of the Top FIIs and FDIs in India.
Top FIIs in India
1 – Government of Singapore: The Government of Singapore has been one of the top investors in India for a couple of years. Currently, it holds 43 stocks with a net worth of over Rs. 121,000 Cr. in India.
2 – Europacific Growth Fund: The Europacific Growth Fund is another notable investor. It holds 6 stocks with a net worth of over Rs. 29,350 Cr. in India.
3 – Government Pension Global Fund: The Government Pension Global Fund from Norway has invested in 65 stocks with a net worth of over Rs. 51,800 Cr. in India.
Government Pension Global Fund major holdings include
Infosys
Housing Development Finance Corporation
Bharti Airtel
Axis Bank
Mahindra & Mahindra
Cipla
Tech Mahindra
Varun Beverages
UPL
Havells India
Tata Consumer Products and more.
Some of the other Foreign Institutional Investors(FII) that have holdings in India are
Oppenheimer Developing Markets Fund
Vanguard Fund, Nalanda India Fund Limited
Elara India Opportunities Fund Limited
Amansa Holdings Private Limited
Smallcap World Fund Inc
East Bridge Capital Master Fund Limited.
TRENDING
Top FDIs In India
Government of Singapore: The Government of Singapore has invested not only as FII in India, but also in FDI. It was the top source of FDI in India in the year 2021, with a 40% increase YoY. It mainly invests in IT, manufacturing, real estate, construction, pharmaceuticals and renewable energy and has invested over 17 billion USD in India.
USA: Recently, the USA has replaced Mauritius as the second-largest foreign investor in India. It invested almost 14 billion USD in India. Companies like Google, Apple, Microsoft, Ford, ExxonMobil, PepsiCo, JP Morgan, General Electric, Johnson & Johnson and more are investing in India.
Mauritius: It was the second-largest foreign Investor in India until the US took over. In October 2021, it exited the FATF’s (Financial Action Task Force) Greylist, since it has improved its anti-money laundering /counter financing of terrorism regime. This means that we can expect an increase in FDI in India from the island.
The other major FDIs in India are the Cayman Islands, the Netherlands, Japan and the UK, as per a report published in October 2021.
In Closing
Foreign Institutional Investors may also invest in FDI in another country, but it is not necessary. As per a report by CII and EY, India is expected to attract foreign direct investments (FDI) of US$ 120-160 billion per year by 2025.
Further, as per a report by Deloitte, India remains an attractive market for international investors in terms of short-term as well as long-term prospects. India ranked 37th on the Institute for Management Development (IMD)’s annual World Competitiveness Index 2021.
This was mainly due to stable public finances and optimistic sentiments amongst stakeholders. This will help India to grow as an economy.
That’s all for this article on Top FIIs and FDIs in India we hope it helped you get a better understanding of their importance and roles. Be sure to leave a comment and let us know what you want us to write about.
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Simran Bafna
Hey, there! Thank you for stopping by 🙂 Simran is a master graduate in commerce from Bangalore University, an NSE-certified Fundamental Analyst and a NISM-certified Research Analyst. She finds interest in investing and personal finance. Outside of work, you can find her painting, reading and going on long walks.
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An investment through FDI is beneficial for the entire country as it results in an increase in the GDP of the country. Investment through FII results in an increase in the capital of the companies in the country. FDI investment results in the transfer of control or influence over the investee company.
FDI stands for Foreign Direct Investment, which means investing in a country other than your home country. It involves direct capital inflows from one country to another. FII stands for Foreign Institutional Investors, these are large companies and institutions that invest in overseas countries' financial markets.
Foreign Institutional Investors is an institutional, individual or group entity seeking to invest in the economy of a country other than where the entity is headquartered. FIIs are important to emerging economies because they bring funds and capital to businesses in developing countries.
In FY 2014-15, FDI inflow in India stood at mere $ 45.15 bn, which increased to $ 60.22 bn in 2016-17 and further to the highest ever annual FDI inflow of $ 83.57 bn reported during the FY 2021-22. Total FDI inflows in the country in the FY 22-23 is $ 70.97 Bn and total FDI equity inflows stands at $ 46.03 Bn.
Foreign Direct Investment or FDI is defined as the investment made by a company in the company situated outside the country. Foreign Institutional Investor or FII is when investors, most commonly in the form of institutions that invest in the country's financial market.
FIIs will increase capital inflows into the country. They also contribute to economic development by making long-term capital available for projects. FII focuses on equity rather than debt which helps in maintaining and improving the capital of the company they are investing in.
India has seen substantial investment by FPIs and FIIs with close to Rs. 4,433 crore (or USD 600 million) in 2021-22 up to June 22, 2021 (Source: IBEF). Foreign Institutional Investors route their money into emerging economies because of greater growth potential there.
FIIs who obtain specific approval from SEBI have been permitted to invest 100% of their portfolios in debt securities. Such investment may be in listed or to be listed corporate debt securities or in dated government securities, and is treated to be part of the overall limit on external commercial borrowing.
Mauritius, Singapore, the U.S., the Netherlands, Japan, the U.K., Germany, and the United Arab Emirates are the main investing countries in India. Investments were mainly oriented towards services, computer software and hardware, telecommunications, trade, the automobile industry, construction, and chemicals.
A foreign institutional investor is an investor in a financial market outside its official home country. Foreign institutional investors can include pension funds, investment banks, hedge funds, and mutual funds.
An FII is typically an investor, an investment fund, or an asset that invests in a foreign country outside of the one where it is headquartered or registered. In India, FII is used for overseas entities that invest in the Indian financial markets.
How do FIIs and DIIs impact the stock market? FIIs and DIIs usually form about 35% of the activity of India's stock exchange activity and heavily influence the stock markets. When an FII or a DII invests in a company, it usually gives confidence to a large number of retail and individual investors.
FDI includes investments in high-yielding assets such as the plant and machinery of a business. FII includes investments in financial assets such as stocks, mutual funds, insurance companies etc.
Definition: 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. Description: Foreign institutional investors play a very important role in any economy.
In 2022, FIIs pulled out ₹1.21 lakh crore. The selling continued in the first two months of 2023 before gradually reversing in March and April — with inflows of ₹1,997 crore and ₹5,711 crore respectively. “FIIs are net sellers on a year-to-date basis.
FIIs are generally limited to a maximum investment of 24% of the paid-up capital of the Indian company receiving the investment. However, FIIs can invest more than 24% if the investment is approved by the company's board and a special resolution is passed.
Section 115AD of the Income Tax Act, 1961, deals with Tax on income of Foreign Institutional Investors from securities [excluding dividend income which is exempt u/s 10(34) and income from units of mutual fund which is exempt u/s 10(35)] or capital gains arising from their transfer.
FII and MF position limit in all index futures contracts on a particular underlying index is Rs.500 crores or 15 % of the total open interest of the market in index futures, whichever is higher. This limit is applicable on open positions in all futures contracts on a particular underlying index.
These investors generally prefer equity over debt. So this will also help maintain and even improve the capital structures of the companies they are investing in. These institutions are professionally managed by asset managers and analysts. They generally improve the capital markets of the country.
FII money continued to move into the capital goods sector as they bet on the growing infrastructure in the country. This sector saw inflows of Rs 1,613 crore in April, but was lesser than Rs 2,507 crore in March.
Holding of FIIs (in INR value terms) in companies listed on NSE stood at INR 55.70 lakh crore as on December 31, 2022, an increase of 4.98 per cent from INR 53.06 lakh crore as on September 30, 2022.
During the first half of this fiscal, Singapore emerged as the top investor.It was followed by Mauritius, the U.A.E., the U.S.A., the Netherlands and Japan.
Top investor countries in India in FY 2023. In FY 2023, Singapore accounted for maximum inward FDI in India at US$17.20 billion, followed by Mauritius (US$6.13 billion), the US (US$6.04 billion), UAE (US$3.35 billion), and the Netherlands (US$2.49 billion).
Popularly known as the “Warren Buffett of India,” Rakesh Jhunjhunwala is one of the greatest stock market investors India has ever seen. Born on July 5, 1960, Rakesh Jhunjhunwala was a stock market veteran. His father was an Income Tax Officer.
Domestic Institutional investors (DIIs) are those who make investments in a nation's financial assets on behalf of businesses or institutions including banks, insurance firms, mutual funds, and others.
The investment institutions like mutual funds, pension funds fall under the foreign institutional investors (FII) or domestic institutional investors (DII) category. All three together form a critical part of the markets. Historically, FIIs have been key participants in the Indian markets.
On top of FII shopping list last month was services (Rs 7,246 crore), power (Rs 3,214 crore), metals and mining (Rs 2,938 crore), auto (Rs 2,695 crore), capital goods (Rs 2,507 crore) and construction (Rs 2,224 crore).
Despite their advantages, FIIs can also have some disadvantages. These include: Volatility: FIIs can be a source of volatility in local securities markets, particularly if they enter or exit positions rapidly.
Only through the country's portfolio investment scheme (PIS) can the FIIs invest in India's primary and secondary capital markets. Through this scheme, FIIs are allowed to purchase shares and debentures of Indian companies on the normal public exchanges in India.
How do FIIs and DIIs impact the stock market? FIIs and DIIs usually form about 35% of the activity of India's stock exchange activity and heavily influence the stock markets. When an FII or a DII invests in a company, it usually gives confidence to a large number of retail and individual investors.
FII's play an important role in the Indian securities market, as they bring in foreign capital and provide liquidity to the market. They also help to diversify the investor base, as they bring in a different set of investors with different risk appetites and investment objectives.
A foreign institutional investor is an investor in a financial market outside its official home country. Foreign institutional investors can include pension funds, investment banks, hedge funds, and mutual funds.
Foreign institutional investors (FIIs) have increased their purchases of shares in India, leading to a revival of the Indian stock market and making it one of the best performing emerging markets. In April alone, FIIs purchased INR11,630 crore ($1.7bn) of shares, compared with INR7,935 crore the previous month.
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