Difference between FDI and FII

FDI (Foreign Direct Investment)

FDI refereed as Foreign Direct Investment, which means the investment made by a company or individual entity into an entity or a company based in another country. FII is the abbreviation for Foreign Institutional Investor, which means the investment made by an investor or an investment fund of one country, into the financial markets of another country.

FII (Foreign Institutional Investor)

FII is an abbreviated term for Foreign Institutional Investor. It means the investment made by an individual investor or an investment fund, into the financial markets of another nation. Organizations like hedge funds, insurance companies, pension funds and mutual funds can be called as institutional investors. The term FII is mainly used in India to denote the foreign companies investing in its financial markets. For such an investment to take place in India, the investor must first be registered with SEBI. The Indian government regularly practices the policy of limiting FII ownership in Indian companies. India has also announced in its annual fiscal budget of the year 2013-14 that it shall act inline with the international practice of classifying Foreign Direct Investment and Foreign Institutional Investor according to their respective stakes in a particular stock. That is, foreign investors with less than 10% stake in a particular stock will be considered as FII, and more than 10% stake will be treated as FDI.

Difference between FDI and FII

FDI and FII

FDI

FII

1. Foreign Direct Investment is an investment that a parent company makes in a foreign country.  FII is an investment made by an investor in the markets of a foreign nation.
2. FDI flow into the primary market.  FII flows into secondary market.
3. FDI’s are long term investments.  FII are short-term investments.
4. Foreign Direct Investment enhancing the capital of a specific enterprise.  The FII increasing capital availability in general.
5. Foreign Direct Investment is more table.  Foreign Institutional Investor is less stable.
6. FDI not only brings in capital but also helps in good governance practices and better management skills and even technology transfer.  Foreign Institutional Investor helps in  promoting good governance and improving accounting, it does not come out with any other benefits of the FDI.
7. FDI flows into the primary market.  FII flows into secondary market.