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.