8th July 2024 (11 Topics)

Copy

1 Jul

2 Jul

3 Jul

4 Jul

5 Jul

6 Jul

8 Jul

9 Jul

10 Jul

11 Jul

12 Jul

13 Jul

15 Jul

16 Jul

17 Jul

18 Jul

19 Jul

20 Jul

22 Jul

23 Jul

24 Jul

25 Jul

26 Jul

27 Jul

29 Jul

30 Jul

31 Jul

Foreign Portfolio Investment (FPI)

Context

Indian equity has been attracting FPI inflows

About:

Foreign portfolio investment (FPI) involves holding financial assets from a country outside of the investor's own.
FPI holdings can include stocks, ADRs, GDRs, bonds, mutual funds, and exchange traded funds.
Along with foreign direct investment (FDI), FPI is one of the common ways for investors to participate in an overseas economy, especially retail investors.
Unlike FDI, FPI consists of passive ownership; investors have no control over ventures or direct ownership of property or a stake in a company.

Benefits of FPIs?

Inflow of foreign currency: More FPIs increases the inflow of foreign currencies in the country, positively impacting the balance of Payment of the nation.
Surplus Balance of Payment: More dollar in the forex reserve increase strengthens the balance of payment situation.
Appreciation of currency: Supply of dollar in the economy limits the downfall of rupee and increases the value of rupee with respect to foreign currency.
Increase in Import cover: Availability of forex reserve at surplus position makes the country’s import cover stronger, essential for import dependent country like India.
Reduction in Import Bill: Appreciated currency or a stronger rupee reduces the burden of out shelling of funds on imports.

Risk associated with the FPI?

Easy way of entry and exit: FPIs are volatile in nature, with a barrier free entry and exit method, creating a fluctuation in the Indian market.
Short term investment: Due to negligible barrier for movement, there remains a scope for volatility in the investment.
Hot money: Frequent inflow and out flow of dollar, increases the risk of currency volatility in the exchange rate market, further having a prolonged impact in the stock market and profitability of the domestic investors.
Forex stress: Repayment of the investment money in dollar terms increases the burden on the forex reserve of the country.
Depreciation of rupee: Sudden dumping of FPIs in the economy reduces the value of local currency with respect to dollars.
Increase in Import bills: With a weaker rupee, India has to shell out more fund for the same amount of goods, widening the scope for imported inflation.
Balance of Payment crisis: Increasing import bills and decline in foreign investment leads to outflow of dollars from the economy, creating a potential threat to the Balance of Payment.

We need a data-driven strategy to plug our skill gaps

Polity & Governance Governance

The ANRF plan has got off on the wrong foot

Polity & Governance Governance

A Framework Law for Low-Carbon Climate Resilient Development

Ecology and Environment Environmental Governance

Northeast India's Battle Against Drugs

Internal Security Miscellaneous

Runaway Silver Imports from UAE through GIFT City

Economy Trade and Commerce

Bail Cannot Be Withheld as a Form of Punishment, Says SC

Polity & Governance The Judiciary

India May Rent Oil Storage in Southeast Asia for Reserves

Economy Miscellaneous

Yak (Bos grunniens)

Geography Miscellaneous

Angel Tax

Economy Money and Banking

GS Analyst: Daily Current Affairs

8th July 2024 (11 Topics)

Copy

Foreign Portfolio Investment (FPI)

About:

Benefits of FPIs?

Risk associated with the FPI?

Still Have Questions?

GS Analyst: Daily Current Affairs

Foreign Portfolio Investment (FPI)

About:

Benefits of FPIs?

Risk associated with the FPI?

Still Have Questions?

User Login

User Register

Forgot Password

Verify Your Mobile Number