Why in the News
Foreign investors have withdrawn ₹60,847 crore from Indian equity markets in April 2026, leading to a sharp depreciation of the Indian rupee, which touched nearly ₹95 per dollar.
Foreign Institutional Investor (FII)
While the terms FPI and FII are often used interchangeably, there is a technical distinction based on the 2014 SEBI regulations which merged several categories into the FPI regime.
- Definition: FIIs are large entities (like Pension Funds, Mutual Funds, Investment Trusts) registered in a country outside India that propose to invest in Indian financial markets.
- Consolidation: Previously, there were FIIs and QFIs (Qualified Foreign Investors). To simplify the process, SEBI introduced the Foreign Portfolio Investor (FPI) Regulations, 2014, effectively making FIIs a part of the broader FPI category.
- Key Distinction: FPI is the investment, whereas FII is the institutional entity that performs the investment.
| Feature | FDI | FPI | FII |
| Primary Goal | Management control & long-term growth | Capital gains & dividends | Institutional portfolio diversification |
| Investment Asset | Physical assets (factories, land) | Financial assets (stocks, bonds) | Financial assets (stocks, bonds) |
| Duration | Long-term | Short to Medium-term | Short to Medium-term |
| Complexity | High (involves legal & operational setup) | Low (easy to trade via exchanges) | Low (but requires regulatory registration) |
| Volatility | Very Low | High | High |
| Who Invests? | Multinational corporations | Individuals or Institutions | Large organizations (e.g., Pension Funds) |
| [2022] Consider the following statements: 1 Tight monetary policy of US Federal Reserve could lead to capital flight. 2 Capital flight may increase the interest cost of firms with existing External Commercial Borrowings (ECBs). 3 Devaluation of domestic currency decreases the currency risk associated with ECBs. Select the correct answer using the code given below: (a) 1 and 2 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3 |
