Foreign Institutional Investors:
Foreign Institutional Investors (FIIs) became net buyers of Indian equities for the first time in four months in April 2025, registering an inflow of ₹4,223 crore.
- FIIs are a subset of Foreign Portfolio Investors (FPIs), comprising large institutional investors like mutual funds, pension funds, insurance companies, and hedge funds.
- FIIs typically adopt a strategic and structured investment approach in foreign financial markets, offering long-term capital inflows to emerging economies.
- However, rapid FII outflows can destabilize domestic markets, making regulatory oversight
- Regulatory Framework Governing FIIs in India
- FIIs are regulated by:
- The Foreign Exchange Management Act (FEMA), 1999
- SEBI (Foreign Portfolio Investors) Regulations
- The Reserve Bank of India (RBI) monitors sectoral investment ceilings
- FIIs can invest up to 10% in any single Indian company, subject to a cumulative FII/NRI/PIO limit of 24%.
- FII entities now include university funds, charitable endowments, and trusts with a minimum five-year operational track record.
- FIIs are permitted to invest in unlisted securities and use their proprietary funds.
- A major reason cited for the increased FII participation is the softening of the U.S. Dollar Index, which has declined from 104–105 to nearly 99–100, improving the relative strength of the Indian rupee.
- The Reserve Bank of India’s accommodative stance and macro-stability have encouraged investments, particularly in banking, financial services, and insurance (BFSI)
- Meanwhile, FIIs reduced their exposure to the IT sector due to concerns about a potential U.S. recession and its impact on tech earnings.
