FOREIGN PORTFOLIO INVESTMENT

It refers to foreign investment which comes to the Indian stock market. A huge amount of money is invested and shares are bought in large numbers in a diversified manner by these big investors. However, even after buying shares in large quantity, these investors are not at all interested in the management of the company.

Their only intuition is to make instant profit based on movement in the Stock Market. The money brought by FPI into a country never remains stable in one country. It moves from one country to another. Hence, this money is referred to as Hot money.
FPI is broadly divided into 2 types-
1) Foreign Institutional Investment (FII)
2) Qualified Foreign Investment (QFI)

Foreign Institutional Investment (Fll)
They are foreign mutual fund companies or insurance companies. They collect money from a number of interested investors and invest that entire pool of money in the stock market of different countries.

Qualified Foreign Investment (QFI)
QFIs are individual investors who are citizens of any of the country. The citizens of such countries which are member of the Financial Action Task Force (FATF) on Money Laundering and Terror Financing can invest in the Indian share market. They can invest directly on their own without any role of the FIIs.

Financial Action Taskforce (FATF) is an inter-governmental body that checks money laundering
and terrorist financing among the member countries. It has its headquarters located in Paris. At present, it has 39 members including India. These 39 members include 2 regional organizations i.e. European Union (EU) and Gulf Cooperation Council (GCC).

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