FOREIGN PORTFOLIO INVESTMENT
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Context:
- Foreign portfolio investors (FPIs) pulled out as much as Rs 17,537 crore from the Indian markets in just three trading sessions of March as investors' sentiment got dented by the uncertainty triggered by the Russia-Ukraine conflict and rising crude oil prices.
FPI:
- Foreign portfolio investment (FPI) is a common way to invest in overseas economies.
- It includes securities and financial assets held by investors in another country.
- Securities (in FPI) include stocks or American Depositary Receipts (ADRs) of companies in nations other than the investor's nation. It also includes bonds or other debt issued by these companies or foreign governments, mutual funds, or exchange-traded funds (ETFs) that invest in assets abroad or overseas.
- On a macro-level, foreign portfolio investment is part of a country’s capital account and shown on its balance of payments (BOP). BOP calculates the amount of money flowing from one country to other countries over a financial year.
- FPI is relatively liquid depending on market volatility.
Who invests through FPI?
- Individual investors interested in opportunities outside their own country invest via FPI.
- It does not give investors direct ownership of a company's assets.
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