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.