FPI FII FDI Outflow: The recession continues in the stock market. Sensex and Nifty have fallen more than 10 percent from their record high. While investors also invest Rs. Capital worth more than Rs 50 lakh crore has been destroyed. The reason for the big fall in the stock market is the selling by FPI and FII. Let us know what are FPI and FII and how do they play an important role in the market?
What is FPI, FII and FDI?
FDI: Foreign direct investment is a direct investment made in a foreign company or organization. In which an investment company, organization or individual from one country invests more than 10 percent directly in the company or organization of another country.
FPI: Any foreign investor, organization or company can invest up to 10 percent in foreign portfolio investment. In which other countries invest in financial assets such as stocks, bonds or mutual funds.
FII: Foreign institutional investment allowed in 1994. FIIs invest just like FPIs. In which a foreign investor buys 10 percent or less stake in a company. FIIs cannot invest in unlisted companies.
This can be done by investing in financial assets
Stock: An investor buys shares in foreign companies, allowing them to benefit from dividends or capital gains.
Equity Mutual Funds: Instead of investing directly in shares, an investor can choose to invest in equity based mutual funds.
ETF: It is a fund that tracks a specific index and sector. And can be traded on the stock exchange. Foreign investors can buy ETFs. Under debt securities it also invests in government bonds, corporate bonds and fixed income mutual funds. Invests in treasury bills, commercial paper, certificates of deposit, real estate investment trusts, derivatives, commodity linked investments, sovereign wealth funds, hedge funds and private equities.
Importance of FPI, FII
FPI, FII is a common way of investing in the economy. FPI investments do not suffer from liquidity constraints and invest from a short-term perspective. They buy and sell based on interest rates and political events.
Comments are closed.