Foreign Institutional Investors (FII)

FII stands for Foreign Institutional Investors. These are institutional investors that invest in the financial markets of a country outside of their own. They can include hedge funds, mutual funds, pension funds, insurance companies, and other types of financial institutions from foreign countries.

• Capital Inflows: FIIs bring in significant amounts of foreign capital into the domestic market, which can boost liquidity and provide capital for companies to grow and expand.
• Market Liquidity: With their large investment portfolios, FIIs contribute to the liquidity of the share market. Their trading activities often result in increased trading volumes, which can lead to smoother price discovery and lower bid-ask spreads.
• Market Sentiment: The actions and decisions of FIIs can influence market sentiment. Positive or negative moves by FIIs may affect investor confidence and influence overall market trends.
• Portfolio Diversification: FIIs offer domestic investors the opportunity to diversify their portfolios internationally by investing in foreign securities through mutual funds or other investment vehicles managed by FIIs.
• Impact on Exchange Rates: Large inflows or outflows of foreign capital by FIIs can impact the exchange rate of the domestic currency. This can have implications for import/export competitiveness and overall economic stability.

Overall, FIIs play a crucial role in the global financial markets, including the share market, by providing capital, liquidity, and diversification opportunities, while also influencing market sentiment and exchange rates.