An Overview of Foreign Portfolio Investment in India | Top Ten MBA Colleges in Bangalore

Posted by Dr. Dinesh Mahajan On 05/04/2023 09:12:14

Introduction: Foreign portfolio investment (FPI) plays an important role in the development of a country. It involves an investor purchasing foreign financial assets. The transaction of foreign securities generally occurs at an organized formal securities exchange or through an over-the-counter market transaction. Foreign portfolio investors can have equities, bonds, derivatives, mutual funds, and guaranteed investment certificates, among other instruments. FPI is popular among various types of foreign investors such as individuals, companies, and foreign governments. Indian capital markets demonstrated resilience in 2021-22 on the strength of the recovery in economic growth and robust corporate performance. This was despite the repeated challenges in the form of pandemic waves and the outbreak of the Ukraine-Russia war towards the end of the financial year. good mba colleges in bangalore

Role of FPI: It provides investors with an opportunity to diversify their portfolio internationally. Investors may be able to access an increased amount of credit in foreign countries, allowing the investor to utilize more leverage and generate a higher return on their equity investment. Emerging markets can offer investors a different risk-return profile. mba in data analytics in bangalore

The foreign markets are comparatively less saturated and hence, they may offer higher returns and more diversity as well. Indian stock market is providing a long-term opportunity to foreign portfolio investors for investment so that they can have benefited from Indian growth. Indian companies are also getting ease in getting the required funds. top 20 mba colleges in bangalore

FPI in India at a Glance: FPIs made a net infusion of Rs. 25,752 crores in equities in 2021, Rs. 1.7 lakh crore in 2020, which was the best year, and Rs. 1.01 lakh crore in 2019. Before these investments, an outflow of Rs. 33,014 crores was seen in 2019. FPIs have made a net withdrawal of Rs. 1.21 lakh crore from the Indian equity markets in 2022 due to aggressive rate hikes by the central banks globally, particularly the US Federal Reserve, volatile crude, rising commodity prices along with the Russia-Ukraine conflict. This was the worst year for FPIs in terms of flow and withdrawal from equities comes following a net investment in the preceding three years.

Challenges in FPI: There are various challenges in the way of inviting FPI. The change in the political environment may give rise to political risk. This results in a change in investment criteria, economic policies, and repatriation regulations. In developing countries, the capital market liquidity often tends to be low resulting in higher price volatility. Portfolio investments typically have a shorter time frame for investment return. Thus foreign portfolio investors usually expect to quickly realize a profit on their investments.

Government Initiatives: In recent times, a large number of technology initiatives have been taken in respect of the equity markets including the phased introduction of T + 1 settlement, protection of investors' collateral through a  pledge-repledge mechanism, Renunciation of Rights, etc. In the bond markets, the Electronic Bidding Platform and Request for Quote Platform have been gaining increasing traction. top 10 mba colleges in bangalore

MF Central as an interoperable platform between the Mutual Fund RTAs and Depositories gave investors integrated service access to all their Mutual Fund holdings. As part of its commitment to ensuring fairness in the markets, SEBI is using more and more data to find out wrong doing in the markets whether it is in respect of surveillance of trading or investigation into fraud or inspection of market intermediaries. best colleges for mba correspondence in bangalore

Conclusion: FPI has shown tremendous growth in recent years. The confidence of foreign portfolio investors has increased tremendously in the growth story of India. As we go by the predictions of various international rating agencies, India emerges as one of the favorite destinations of FPI due to the strong conviction of foreign portfolio investors in the Indian economy. Due to the heavy investment in the Indian stock market, the confidence of domestic investors has also increased. Now we have observed that more domestic investors are investing in the stock market. In the coming times, more growth of the FPI is inevitable due to the strong fundamentals of the Indian economy. mba colleges in bangalore list

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