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Foreign fund outflows highest since 2008
News
Foreign fund outflows have been the highest in 2018 since 2008
Important Facts
1. The foreign portfolio investors (FPIs) have made a net withdrawal of about 4.8 billion till December 2018. In 2008 foreign investors had pulled out ₹52,987 crores from Indian market
2. Possible reasons for high foreign fund outflows:
• Fall in the rupee value against the dollar
•Volatility in the global stock market due to the concerns related to the trade war between U.S. and China
3. Mitigating factor: According to experts, potential losses due to foreign funds outflow have been largely mitigated due to the strong buying support from domestic institutional investors such as mutual funds and the Life Insurance Corporation (LIC).
Additional Information
1. Foreign Portfolio Investments (FPI):
• With SEBI (Foreign Portfolio Investors) Regulations, 2014, the Government of India merged three investors classes of “FII”, “Sub-accounts” & “QFI” and created “FPI”.
• The investments are made across a host of the capital market segments, including in shares, debentures, warrants, mutual funds, collective investment schemes, derivatives, treasury bills, commercial paper and government securities.
2. Foreign Institutional Investor (FII): Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different country other than that where these organizations are based. Only institutional investors like Investment companies, Insurance funds etc. are allowed to invest in Indian stock market directly. However, if foreign individuals want to invest in India’s markets, they have to get themselves registered as a sub-account of an FII.
3. Qualified Foreign Investor (QFI): A Qualified Foreign Investor can invest in India without sub-account. In order to make investments, they have to open a Demat account and Trade account with a depository participant in India.
