Why in News?
Foreign Portfolio Investors (FPIs) withdrew ₹77,901 crore from Indian equities in H1 2025, led by outflows in the IT, FMCG, and Power sectors. Despite this, FPIs remained net buyers in telecom and financial services during April–June.
Description:
- Foreign Portfolio Investment (FPI) refers to investment by foreign entities in a country’s financial assets such as stocks, bonds, mutual funds, etc.
- It is distinct from Foreign Direct Investment (FDI) as it does not confer ownership/control over a business.
Key Characteristics of Foreign Portfolio Investment:
- Passive investment: No involvement in company management
- Short-term focus: Aimed at quick capital gains
- Enhances market liquidity
- Highly volatile: Sensitive to global/economic events
Foreign Portfolio Investment Policy in India:
- Limit: Foreign investor can hold up to 10% of a company’s paid-up capital under FPI
- If it exceeds 10%, it is treated as FDI
- Regulator: SEBI (under Foreign Portfolio Investment Regulations, 2019)
FPI vs FDI – Key Differences:
| Feature | FDI | FPI |
| Nature of Investment | Physical assets (factories, offices) | Financial assets (stocks, bonds) |
| Control | Involves management/control | No management involvement |
| Duration | Long-term | Short-term/speculative |
| Exit Difficulty | Difficult | Easy and liquid |
| Economic Impact | Boosts jobs, tech | Adds market liquidity |
| Market Type | Primary market | Secondary market |
FIIs vs FPIs:
- FIIs (Foreign Institutional Investors) are a subset of Foreign Portfolio Investments.
- FIIs include mutual funds, pension funds, insurance companies, hedge funds, etc.
- All FIIs are Foreign Portfolio Investments, but not all FPIs are FIIs.
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