FPI Net Inflows Into Stocks At 15-Month High
04, Mar 2019
Prelims level : Economy Mains level : Indian Economy
- Foreign portfolio investors (FPIs) poured in close to Rs. 17,220 crores on a net basis into Indian equities in February, the highest since November 2017, amid clarity on government spending plans and positive sentiment.
- They had pumped in a net amount of around Rs. 19,728 crores into Indian stocks in November 2017. As per the latest data from the depositories, foreign investors pumped in Rs. 1,17,899.79 crore into equities and pulled out Rs. 1,00,680.17 crore in February, a net investment of Rs. 17,220 crores into the stock market.
Foreign portfolio investment:
- The term FPI was defined to align the nomenclature of categorizing investments of foreign investors in line with international practice. FPI stands for those investors who hold a short-term view on the company, in contrast to Foreign Direct Investors (FDI).
- FPIs generally participate through the stock markets and gets in and out of a particular stock at much faster frequencies. Short term view is associated often with lower stake in companies. Hence, globally FPIs are defined as those who hold less than 10% in a company. In India, the hitherto existing closest possible definition to an FPI was Foreign Institutional Investor.
Features of FPI:
- Portfolio Investment by any single investor or investor group cannot exceed 10% of the equity of an Indian company, beyond which it will now be treated as FDI.
- FPIs are not allowed to invest in unlisted shares. In respect of those securities, where FPIs are not allowed to invest no fresh purchase shall be allowed as FPI. They can only sell their existing investments in such securities.
- However, an exception has been made by permitting them to invest in unlisted non-convertible debentures/bonds issued by an Indian company in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant External Commercial Borrowings (ECB) guidelines; FPIs are permitted to invest in Government Securities with a minimum residual maturity of one year. However, FPIs have been prohibited from investing in T-Bills.
- FPI can invest in privately placed bonds if it is listed within 15 day