Foreign Portfolio Investors (FPIs) invest in financial assets such as stocks and bonds in foreign countries. In India, FPIs significantly influence capital markets, providing liquidity and shaping market trends.
FPI vs. FII
FPIs include a broad range of investors, while Foreign Institutional Investors (FIIs) refer specifically to institutional investors. Alongside FPIs, Domestic Institutional Investors (DIIs) also play a key role in the Indian market.
Key Effects of FPIs
- Liquidity
FPIs inject capital, boosting funds available in the market, enhancing price discovery, and ensuring smoother trading. - Market Volatility
FPI inflows can drive market rallies, while outflows may trigger corrections. This volatility often reflects global economic trends and geopolitical events. - Currency Impact
FPI movements influence the Indian Rupee: Inflows strengthen the Rupee and Outflows weakens it.
Current Trends (as of November 21, 2024)
The U.S. Dollar (USD) is valued at ₹84.46, with greater purchasing power than the Indian Rupee. This allows foreign institutions to pump money into Indian markets on a much larger scale than domestic investors.
- DII and FPI Activity: DIIs purchased ₹4,200 crore, while FPIs exited ₹5,320 crore. (Source: NSE Report)
- Market Index: Nifty50 closed at 23,349 points, continuing its decline due to FPI outflows. (Source: Market Indices)
- Currency Trends: The Rupee is weakening, reflecting FPI withdrawals. (Source: USD-INR Chart)
FPIs have a profound impact on liquidity, market stability, and currency trends, underscoring their importance in the Indian financial ecosystem.