What are FII?

Foreign Institutional Investors (FII)

Investment funds that invest in India but are registered outside India are known as Foreign Institutional Investors (FII). These investors could be mutual funds, hedge funds, or insurance companies. 

In India the foreign institutional investors must register with SEBI (Securities and Exchange Board of India) to trade in the market.

How do FII impact Indian economy

FII lead to appreciation of the currency.

For example: If FII bring in Dollar investment into India, the increase in Dollar inflow would lead to appreciation of the Rupee. Conversely, if there is less Dollar inflow into the country, the Rupee will depreciate compared to the Dollar.

Impact on Imports and Exports

Appreciation or Depreciation has a direct impact on the imports and exports. Appreciation of the Rupee makes Imports cheaper but our Exports less competitive in the international markets.

Impact on Stock Markets

FII investments can lead to stock market rallies. Conversely, if FII pull out it may lead to market crash.