Elaborate on various types of investors.

The investors can be categorized as follows: Individual

investors, Partnership/HUF, Societies and Trusts,

Companies, Mutual Funds, Financial Institutions and

Foreign Institutional Investors

Individual investors: Individuals form a major part of

the securities in terms of numbers. The individual investors

are further divided into two categories in case of IPO:

Retail investors who can apply for share of an amount less

than Rs 1 lakh) and High Networth Individuals (HNI) who

can apply for shares of an amount Rs 1 lakh or more.

The share of the retail investors in an IPO is 35 per cent

and that of HNIs is 25 per cent. Thus according to SEBI

regulations retail investors are preferred over the other

types of investors.

Partnership/HUF: Association of members or partnership

formed by various groups or a joint family come

together to invest their surplus fund in order to earn returns

fall into this category.

Societies and Trusts: These are also associations of persons.

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 or trust is formed.

Companies: Also termed as corporate investors, companies

can also operate as individual investors for which the

board should be authorised by the Memorandum of

Articles.

Mutual Funds: It is a form of collective investment. A

mutual fund collects money from many investors and

invests such pooled fund in share market. Income is received in the form of capital gains, interests or dividends

on securities. (Further details in Chapter 08 Mutual Funds)

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 include banks,

insurance companies, pension funds and venture capital

companies.

Foreign Institutional Investors (FIIs): 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.

As per SEBI regulations an FII cannot invest more than

10 per cent of total issued capital of an Indian company.

These prescribed limits are subjected to the overall limit of

24-49 per cent or the sectoral limit as prescribed by the

Government of India/Reserve Bank of India.