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Foreign Portfolio Investment (FPI)
Context:
The Securities and Exchange Board of India (SEBI) has launched an outreach cell for Foreign Portfolio Investors (FPIs) to assist them in accessing the Indian market.
More on News:
- This cell, part of the Alternative Investment Fund and Foreign Portfolio Investors Department (AFD), will directly engage with FPIs, offering guidance on documentation, compliance, and other pre-application requirements.
- It will also provide support during the onboarding process by addressing any operational challenges.
- Additionally, SEBI is considering further measures to simplify and expedite the onboarding and application process for FPIs.
Foreign Portfolio Investment (FPI):
- It refers to investments made by foreign entities in a country’s financial assets, such as stocks and bonds, without seeking direct control or management of the companies involved.
- Unlike Foreign Direct Investment (FDI), where investors have a significant degree of control and involvement, FPI is characterised by passive ownership and is typically more liquid and easier to trade.
Recent Trends in FPI:
India has experienced a significant resurgence in Foreign Portfolio Investment (FPI) flows, particularly in the fiscal year 2023-24.
Record Inflows:
- High Net Inflows: As of March 2024, India is on track to achieve record FPI inflows, with net investments expected to reach approximately ₹12,000 crore ($1.4 billion) in the first week of March alone.
- Cumulatively, net inflows for FY24 have crossed $36.6 billion, surpassing the previous high of $36.2 billion recorded in FY21.
- Equity vs. Debt: Of the total inflows this fiscal year, $22.5 billion has been directed towards equities, while $13.4 billion has flowed into debt instruments.
Economic Drivers:
- Strong GDP Growth: The third quarter GDP growth rate of 8.4% has significantly boosted investor sentiment, positioning India as a resilient market amid global uncertainties.
- Market Stability: The ongoing rally has seen indices like Sensex and Nifty50 reaching record highs, further encouraging FPI participation.
Geographic Distribution:
- Dominance of U.S. Investors: By March 31, 2024, the United States accounted for the largest share of FPI investments in India, with 3,457 registered FPIs.
- This was followed by Luxembourg and Canada, highlighting a diverse international interest in Indian markets.