Foreign Portfolio Investors

Foreign Portfolio Investors:

June 2022 witnessed the worst Foreign Portfolio Investor (FPI) selloff since March 2020 when India announced a nationwide lockdown at Rs. 50,000 crore.

  • June was also the ninth on the trot that FPIs had sold net of their assets i.e. sold more than they had purchased.
  • Foreign portfolio investors are those that invest funds in markets outside of their home turf.
  • Examples of FPIs include stocks, bonds, mutual funds, exchange traded funds, American Depositary Receipts (ADRs), and Global Depositary Receipts (GDRs).
  • FPI is part of a country’s capital account and is shown on its Balance of Payments (BOP).
  • The BOP measures the amount of money flowing from one country to other countries over one monetary year.
  • They are generally not active shareholders and do not exert any control over the companies whose shares they hold.
  • The Securities and Exchange Board of India (SEBI) brought new FPI Regulations, 2019, replacing the erstwhile FPI Regulations of 2014.
  • FPI is often referred to as “hot money” because of its tendency to flee at the first signs of trouble in an economy.
  • FPI is more liquid, volatile and therefore riskier than FDI.

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