What is FII?
Foreign Institutional Investment or FIIs, are companies or individuals who invest in the financial markets of a country different from where they’re located. Think of them as international investors putting their money into stocks, bonds, or funds outside their own country. They’re important players in the world of finance because they move large amounts of money across borders, influencing the financial markets they invest in. FIIs are seen positively because their investments can bring a lot of money into a country’s economy. This can help boost the stock market and strengthen the local currency. However, because they control so much money, their decisions to invest or pull out their investments can cause big swings in the market prices and currency values. Countries often keep a close eye on these foreign investors, setting rules for how they can invest. This is done to manage the influence they have on the local economy and to ensure that their activities benefit the host country.
Difference between FDI and FII
Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are two primary forms of international investments, each with distinct characteristics, purposes, and economic impacts. Both FDI and FII are crucial for global economic integration and development, but their approaches, impacts, and objectives significantly differ. FDI is more about physical and long-term investments in foreign enterprises with control and management interests, often leading to direct economic benefits like job creation and infrastructure development. On the other hand, FII focuses on short-term financial investments, contributing to capital flow and market liquidity but with the potential for greater volatility and less direct impact on the real economy.
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