Various Types of Investors In Indian Stock Market

In the previous lesson, I wrote about the Various Market Players in stock market, In which I also discussed about the Investors.

Today in this lesson we will learn more about the various types of investors in Indian stock market.

Various Types of Investors

There are various types of investors such as Individual Investors, Partnership/HUF, Companies, Mutual Funds, Societies and Trusts. Financial Institutions and Foreign Institutional Investors (FII’s).

Let’s discuss more about various types of investors…

Individual Investors: In India, Individuals form a major part of the securities market in terms of numbers. The Individual Investors in India are further divided into two categories in case of Initial Public Offering (IPO) :

Retail Investors – one who can apply for shares of an amount less than Rs. 1 lakh, and

High Networth Individuals (HNI) – one who can apply for shares of an amount of Rs. 1 lakh or more.

Parnership/HUF: An association of members or group of peoples those who form a partnership firm or a Joint Hindu Family who have their HUF business and wants to invest their surplus fund into securities market to earn returns on it, falls under this category of Investors.

Companies: Also termed as corporate investors, companies can also operate as individual investors for which the board should be authorized by the Memorandum of Articles.

Societies and Trusts: These are also an associations of members. But they have to be empowered by their by-laws to invest in the security markets. Here the income earned by such investment should be invested for the objectives for which the society is formed.

Mutual Funds: It is a form of collective investment by investors. A mutual fund collects money from many investors and invests such pooled fund in stock market. Income is received in the form of capital gains, interests or dividends on securities.

Financial Institutions: They are the major investors in terms of volumes and values in the securities market both in the primary and secondary market. These includes banks, insurance companies, pension funds and venture capital companies.

Foreign Institutional Investors (FII’s): This is an entity formed or incorporated outside India with the purpose to invest in India. These entities are required to be registered with SEBI as FIIs.

There are few regulations by RBI on Investment by FII’s – you can read full details here.

So, the above are the various types of investors in Indian stock market, in the next lesson I will discuss about Qualified Institutional Buyers (QIBs) – Subscribe Now to receive it directly in your inbox.

If you have any query/feedback then, you can tweet me @gurpreet_saluja.