Foreign Institutional Investors

Overview

Last updated: Nov, 2025

Introduction

Foreign Investments are considered crucial for nations, especially for an emerging economy like India. Foreign Investors can be classified majorly as Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs). FDIs are investments to acquire a substantial ownership stake in a company or project by an investor, company, or government from another country that directly augments the production of goods and services in an economy. FPIs investments by non-residents in Indian financial assets shares, government bonds, corporate bonds, convertible securities, and infrastructure securities. FPIs comprise investment groups such as Foreign Institutional Investors (FIIs), Qualified Foreign Investors (QFIs), and subaccounts. FIIs are big investor institutions Pension Funds, Mutual Funds, Insurance Companies, etc.

In India, both domestic and foreign investments are vital and contribute enormously to the nation's expansion. India is considered one of the fastest emerging economies in the world and a leading country in attracting foreign investments. India has several investment opportunities in its equity market for local and Foreign Institutional Investors (FIIs). Since its inception in 1992, India’s FII investments have largely remained positive.

The FIIs poured a massive US$ 60.31 billion into Indian equities from March 2009 to November 2010 and lifted the Nifty from around 2,500 to 6,300. Similarly, during the Covid crisis, when the Nifty recovered and surged from around 8,000 (April 2020) to 18,600 (October 2021), the Indian markets saw investments of US$ 38 billion by FIIs. Moreover, FPIs have cumulatively invested US$ 20 billion between March-August (2023) before becoming net sellers in Asia's third-largest equity market in September. Foreign Institutional Investors (FIIs) booked profits in FY25, offloading Rs. 1.27 lakh crore (US$ 14.89 billion), while Domestic Institutional Investors (DIIs) remained consistent buyers, investing Rs. 6.06 lakh crore (US$ 71.04 billion). March 2025 saw reduced FII selling, with DIIs continuing their strong buying streak throughout the year.

Recent Developments

India has taken several initiatives recently to attract more foreign capital to the country. These initiatives have made it an attractive destination for investments. India-focused offshore funds have been able to generate more returns compared to other funds in emerging markets, which has attracted foreign investors to the country. Some of the recent developments in foreign investments are listed below:

India’s real estate sector continues to attract strong investor interest, with equity inflows rising 48% YoY to Rs. 33,710 crore (US$ 3.8 billion) in Q3 2025, driven by heightened demand for land, development sites, and built-up office and retail assets.
According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at Rs. 97,22,411 crore (US$ 1.09 trillion) between April 2000-June 2025.
India also had major FDI inflows during April 2000-June 2025, coming from Singapore at Rs. 12,57,392 crore (US$ 179.48 billion) with a total share of 24%, followed by Mauritius at Rs. 11,10,692 crore (US$ 182.27 billion) with 24%, the USA at Rs. 5,41,654 crore (US$ 76.26 billion) with 10%, the Netherlands at Rs. 3,68,694 crore (US$ 53.97 billion) with 7%, and Japan at Rs. 2,88,090 crore (US$ 44.95 billion) with 6%.
In August 2025, India recorded 84 Private Equity (PE) investments worth Rs. 10,827 crore (US$ 1.24 billion). In the six months ending June 2025 (H1 2025), the country witnessed 519 PE deals amounting to Rs. 1,28,523 crore (US$ 14.93 billion), reflecting continued investor confidence in India’s growth potential.
As of October 15, 2025, the National Stock Exchange (NSE) recorded a total market capitalisation of Rs. 461.26 lakh crore (US$ 5.22 trillion), reflecting strong investor confidence and sustained market growth.
As on October 15, 2025, the NIFTY 50 closed at 25,323.55 mark and Sensex surpassed 82,605.43 on the back of strong inflows from domestic institutional investors (DIIs).
In September 2025, India set a three-decade record for IPO activity, with 25 companies raising Rs. 13,302 crore (nearly 20% of total proceeds), marking the highest monthly tally since January 1997. In H1 FY26, 65 firms are set to raise up to Rs. 69,532.91 crore (US$ 8.2 billion), 35% higher than the Rs. 51,390 crore raised by 40 companies in the same period of FY25, reflecting a strong rebound in primary market activity after the brief slowdown earlier in the year.
Between FY20 and FY25, capital mobilisation through Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvITs) grew significantly, rising from Rs. 10,770 crore (US$ 1.26 billion) to a cumulative total of Rs. 1,60,000 crore (US$ 18.76 billion).
In June 2024, foreign investors turned net buyers by infusing Rs. 26,565 crore (US$ 3.18 billion) into the Indian markets. This contrasted with the net outflow of Rs. 25,586 crore (US$ 3.06 billion) recorded in May. The positive inflow was driven by factors such as political stability and a sharp rebound in the domestic equity markets.
According to a report by Colliers, between 2019 and 2023, foreign inflows comprised of 77% of the total institutional investment in Indian real estate sector with an average annual investment of US$ 4 billion.

Government/Regulatory Initiatives

The Government of India has taken several initiatives to improve regulations and attract foreign capital. India has set up an international stock exchange for assisting foreign investors investing in the country. The first India International Bullion Exchange (IIBX) at GIFT City was launched in July 2022. Apart from these, the government has undertaken several initiatives to attract foreign capital. Some of the recent government initiatives and regulations in the FII space are as follows:

Securities and Exchange Board of India (SEBI), at its board meeting on June 18, 2025, introduced key reforms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to enhance liquidity and investor confidence by streamlining fundraising norms, tightening sponsor lock-in requirements, improving disclosure standards, lowering investment thresholds, and expanding the role of merchant bankers.
SEBI announced disclosure norms for foreign portfolio investors (FPIs) which came into effect from November 1, 2023. Under these regulations, overseas funds that hold more than 50% of their equity investments in a single Indian corporate group or have more than Rs. 25,000 crore (US$ 3.01 billion) of equity assets under management (AUM) in the Indian market, will have to provide detailed information about their beneficial owners.
The Reserve Bank of India has taken a number of actions to increase foreign exchange inflows. These actions consist of:
- Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current interest rate regulations until the end of October 2022.
- Inclusion of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route (FAR) for FPls.
- Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made until October 31st, 2022.
- Permitting FPI in commercial paper and non-convertible debentures with an original maturity of up to one year.
- A temporary increase in the limit for external commercial borrowings (ECBs) under the automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.
- Increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower having an investment grade rating.
- Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund foreign currency loans to organisations for a variety of end uses other than exports.
Liberalisation of Forex Flows was revised on 6th July 2022 to expand India’s external sector, diversify the sources of forex funding to mitigate volatility, dampening global spill overs and supporting exports of goods and services and rising remittances. Some measures are taken with the vision of enhancing India’s robust forex inflows while ensuring overall macroeconomic and financial stability.
The Government of India increased FDI in the defence sector by increasing it to 74% through the automatic route and 100% through the government route.

Road Ahead

India has emerged as one of the most important global investment hubs in recent years. Despite global headwinds like geopolitical tensions, supply chain disruptions, and persistent inflationary pressures in key markets, the Indian economy and financial markets have demonstrated remarkable resilience. Strong domestic demand, steady capital inflows, and structural reforms continue to support growth and investor confidence in the current environment. Indian markets have provided good returns compared to other emerging markets. India is also one of the most attractive FDI destinations. India's cumulative FDI inflow stood at Rs. 97,22,411 crore (US$ 1.09 trillion) between April 2000-June 2025. This is expected to rise investors’ sentiment and increase global investments. India also has a strong start-up ecosystem: the number of DPIIT recognised Indian start-ups has increased from around 500 in 2016 to 1,90,185 as of October 2025. Of these, as of October 14, 2025, a total of 91,789 recognised startups in India had at least one woman director, highlighting the growing presence of women entrepreneurs across the country. India also had one of the best-performing IPO markets in 2025. Favourable government policies, increased infrastructure investment, relaxation of norms and improvement in financial infrastructure can further boost the inflow of foreign capital in the country in future.