FPI - ECONOMY
News: The
amount FPIs have put in Indian equities in May so far
What's in the news?
● 30,945crore
have been put in Indian equities by the FPIs. This came following a net
infusion of ₹11,630 crore in equities in April and ₹7,936 crore in March.
Foreign Portfolio Investments:
● Foreign
portfolio investors (FPIs) in India are non-residents
or NRIs who invest in Indian securities such as shares, bonds, mutual
funds, convertible securities, etc.
● They
do not have direct or active ownership
or control of these assets, but rather passive ownership.
Features:
● According
to Arvind Mayaram Committee (2014),
FPI results in an investor controlling less than 10% of the shares of the
company.
Regulations:
● FPIs are registered with
SEBI and can invest in Indian securities as
per the regulations prescribed by SEBI.
● The Foreign Exchange
Management Act 1999 (FEMA) is the primary
legislation governing FPI in India and has been amended several times to
liberalize FPI regulations in India.
Proposals of SEBI:
It
categorizes FPIs into low risk, moderate risk and high risk.
● The
low risk would cover government and
government-related entities such as central banks or sovereign wealth funds.
● Moderate risk
refers to pension funds or public retail funds with widespread and dispersed
investors.
● All
other FPIs are categorized as high-risk.
○ Additional disclosure
requirements for high-risk FPIs holding more than 50% of their equity asset
under management (AUM) in a single corporate group.
○ The
existing high-risk FPIs with an overall holding in the Indian equity market of
over Rs 25,000 crore comply with the disclosure mandate within six months.
Failing this, they would have to bring down their holding within the threshold.
Go back to basics:
FDI and FPI:
1. FDI:
● Foreign
Direct Investment (FDI) is the investment of a person who is not a resident of
India in capital instruments.
a. in
a listed or an unlisted Indian company.
b. on
a fully diluted basis, 10% or more
of a listed Indian company's post-issue paid-up equity capital.
2. FPI:
● 'Foreign
Portfolio Investment' refers to any capital instrument investment made by a
person residing outside of India that is
a. less
than ten percent of a listed Indian
company's fully diluted post-issue paid-up share capital OR
b. less than 10%
of the paid-up value of each series of a listed Indian company's capital
instrument.