What Are Foreign Institutional Investors?

The concept of foreign institutional investors (FIIs) as they are popularly referred to is hot in countries that are investment friendly. FIIs are also a much discussed topic in countries that have a booming stock market.

FIIs are institutions that invest in the stock markets of a different country for the primary purpose of making capital gains. The amount of time that they will stay invested in the stock market of a country is governed by the laws of the country. FIIs are extremely cash rich and have the capacity to drive individual stocks to unprecedented highs. But on the flip side when they exit a stock, it is the retail investors who are left holding onto the expensive property because they were seduced by the heights that the stock had scaled.

Laws governing stock trading by FIIs need to tread the fine line between being investor friendly and a protector of the retail investor.