INCREASED FOREIGN PORTFOLIO INVESTMENTS
Context
- Despite high valuations, foreign portfolio investors (FPIs) have turned bullish on Indian markets and pumped in thousands crore in February, after the Union Budget presentation on 1st February
MORE ABOUT NEWS
Reasons for Inflow
- Increased Liquidity – Stock market is responding to the Budget 2021-22 that has infused liquidity (money supply in market) in the Indian economy and been pro-growth with privatisation gaining ground.
- Several reforms aimed at protecting shareholder rights and improving the ease of doing business have also been a contributing factor.
- Post Covid Recovery – India, with a recovering economy, is moving back to a higher nominal growth trajectory versus the western world (which continues to struggle with the second wave of Covid and related lockdowns) and looks as a credible destination for growth seeking developed world investors.
BACK TO BASICS (Source – Mrunal.org)
- It is a foreign entity registered at SEBI, and who buys upto 10% in equity / shares of an Indian Company.
- Originally, these were called Foreign Institutional Investor (and Qualified Foreign Investors (QFIs), but in 2013 SEBI merged them all into a single category- FPI, based on the recommendations of K.M. Chandrasekhar committee.
- FPI’s primary objective is make money from buying and selling of shares through the capital market / share market. They even help the SEBI-non-registered foreign investors by issuing them Participatory notes (P-Notes)
- FPIs are not involved in the actual operations / production / management / business policy making of a company (unlike Walmart is for Flipkart).
- If FPI investor is hopeful to get better returns in the other countries’ share/bond market, he may quickly sell his Indian securities and run away. The flight of such money is called ‘hot money’. It results s into weakening of Indian Rupee and falling of Sensex