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.
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.
What is the difference between FIIs and FDIs?
|Basis of Difference||FIIs||FDIs
|Meaning||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are less stable as they have ease of entry and exit.||They are more stable as investments cannot be made or withdrawn easily.|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. 118,304.2 Cr. in India.
The government of Singapore has invested in
- ICICI Prudential Life Insurance Company Ltd.
- Macrotech Developers Ltd.
- Kalyan Jewellers Ltd.
- SBI Life Insurance company Ltd.
- HDFC Life Insurance Company Ltd.
- Hathway Cable & Datacom Ltd.
- Housing Development Finance Corporation Ltd.
- TARC Ltd.
- Indigo Paints Ltd. and more.
2 – Europacific Growth Fund: The Europacific Growth Fund is another notable investor. It holds 9 stocks with a net worth of over Rs. 89,968.7 Cr. in India.
Europacific Growth Fund has invested in
- HDFC Life Insurance Company Ltd.
- HDFC Bank Ltd.
- Axis Bank Ltd.
- Bajaj Finserv Ltd.
- Bharti Airtel Ltd.
- Godrej Consumer Products Ltd.
- ICICI Bank Ltd.
- Kotak Mahindra Bank Ltd.
- Reliance Industries Ltd. and more.
3 – Government Pension Global Fund: The Government Pension Global Fund from Norway has invested in 68 stocks with a net worth of over Rs. 51,232.2 Cr. in India.
Government Pension Global Fund major holdings include
- Atul Ltd.
- Deepak Fertilisers & Petrochemicals Corporation Ltd.
- CreditAccess Grameen Ltd.,
- Hathway Cable & Datacom Ltd.
- Krishna Institute of Medical Sciences Ltd.
- Granules India Ltd.
- Balkrishna Industries Ltd.
- Cadila Healthcare Ltd.
- Divi’s Laboratories Ltd. 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.
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.
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 43rd 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.