Foreign Portfolio Investors (FPIs) remained sellers for the fifth consecutive day and offloaded equities worth Rs. 2,626.7 crore, according to data provided by the NSE.
Foreign Portfolio Investment (FPI) refers to the purchase and retention of a diverse range of foreign financial assets by investors looking to invest in a country other than their own. Foreign portfolio investors can access a variety of investment options in the Indian stock market, including stocks, bonds, mutual funds, derivatives, fixed deposits, etc. These investment prospects are pursued with an understanding of relatively high risk and high reward. Given the increased share price volatility associated with FPI investments, investors also encounter heightened risks while anticipating and striving for greater rewards from their FPI endeavors. FPIs carefully monitor market trends and economic indicators in order to make informed investment decisions. Additionally, FPI investors must also consider factors such as currency exchange rates, political stability, and regulatory changes that may impact their investments. Despite the risks involved, foreign portfolio investments can provide diversification benefits and the potential for higher returns compared to domestic investments. Overall, FPI plays a crucial role in global capital markets by facilitating cross-border investment flows and promoting economic growth and development.
In June 2014, SEBI significantly liberalized foreign portfolio investment (FPI) in India. According to the most recent reports, the United States, Mauritius, and Luxembourg have the highest FPI in India.
Why FPIs have been selling for the past 5 consecutive days:
Due to fears of a global recession, foreign portfolio investors (FPIs) continued as net sellers for the fifth consecutive day. FPIs sold off equities worth Rs 2,626.7 crore, according to data from the National Stock Exchange (NSE). On the other hand, NSE data indicates that domestic investors continued to be net buyers for the fifth day in a row, purchasing stocks valued at Rs 577.3 crore. Wherever US 10-year bond yields rise above 4.5%, foreign portfolio investors (FPIs) have been observed to sell in emerging markets such as India and shift funds to bonds. Elevated inflation in the US has discouraged the US Federal Reserve from initiating rate cuts, thereby maintaining higher bond yields. Consequently, this has triggered increased selling activity in the Indian stock market.
FPIs interested in exchange rates:
Investors can benefit from a fluctuating exchange rate between certain nations. Investing when the exchange rate is low and selling financial holdings when the exchange rate increases can lead to dual benefits, with investment returns enhanced by a higher exchange rate.
Conclusion
FPIs are fearing a recession, a global market crash, declining stocks, Middle East tensions, and no rate cut from the USA so far, which is leading to heavy selling in the Indian stock market.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.