Foreign Institutional Investors (FIIs) have grown predominantly in India with the private equity and venture capital taking a leading role. This article discusses these two entities in greater depth.

Of late, India has attracted an ample of foreign investments. Even the common man is now aware of the word `FIIs'. So, obviously, the question arises as to who these entities are, and why they are coming to India? FIIs are the Foreign Institutional Investors. India has become the hub for the FIIs. We can observe the same from the number of FIIs registered with the SEBI. Before the year 1992, there was not a single FII registered with the SEBI, but during the year 200001, the number of FIIs registered was 528. It further increased to 803, by October 2005. During the year 2005, only India had attracted almost 145 new FIIs. So, it is definitely an eye catching phenomenon. Now one would be eager to know from where these FIIs are coming to India? Indian stock market has attracted large number of investors from Japan and Europe. Some nontraditional countries like, Canada, Denmark, Italy, Belgium, etc., are also participating in the Indian stock markets. Among all these investors of various countries, the Japanese investors have the major share in the investment and they have the longterm investment horizon too, which will ultimately help India. Recently Mizuho Corporate Bank has decided to expand their base in India and it has managed to convince around 60 to 65 major Japanese Corporates to set their manufacturing and marketing base in India.

With the FIIs making money from the Indian stock markets, the private equity player entities are not lagging behind. But, what are these private equities and how do they operate in India?

We can understand the term private equity, as entities which invest in the companies that are not listed in the stock exchange and have the growth potential to outperform. Generally, this investment is made by the way of leveraged buyout, venture capital, mezzanine financing and angel investment. Nowadays, it is observed that the investment by the way of private equity is grabbing popularity. This is because of the obvious reason that the probability of getting the target return is higher in the case of private equity.

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