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FPI SALES AT A RECORD HIGH AS VIRUS SPOOKS MARKETS

Focus: GS-III Indian Economy, Economic Development

Why in news?

  • Foreign portfolio investors (FPIs), who have been the prime drivers of every bull run that the Indian capital market has seen till date, have been record sellers during the March 2020 month.
  • Till 17th of March, FPIs equity sold and debt cumulatively is the highest ever witnessed in any single month, as per data from National Securities Depository Limited (NSDL).

Details

  • Increasing concerns over the COVID-19 pandemic has made investors move away from riskier asset classes.
  • Market participants, however, believe that with the valuations taking a massive hit on account of the ongoing fall, institutional investors, especially overseas entities, will slow the pace of selling to buy heavily beaten down quality stocks.

Foreign portfolio investors (FPIs)

  • Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country.
  • In economics, foreign portfolio investment is the entry of funds into a country where foreigners deposit money in a country’s bank or make purchases in the country’s stock and bond markets, sometimes for speculation.
  • It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market.
  • Along with foreign direct investment (FDI), FPI is one of the common ways to invest in an overseas economy. FDI and FPI are both important sources of funding for most economies.

Bear Market

  • A bear market refers to the market where share prices are continuously declining.
  • Its downward trend makes investors believe that the trend will continue, which, in turn, perpetuates the downward spiral.
  • It is considered riskier to invest in a bear market, as many equities lose value. Thus, most investors withdraw their money from the markets.
  • During a bear market, the economy slows down and unemployment rises as companies begin laying off workers.

Bull Market

  • A bull market refers to a market that experiences a sustained increase in market share prices.
  • It ensures investors that the uptrend will continue over the long term.
  • It signifies that the country’s economy is strong and employment levels are high.

National Securities Depository Limited (NSDL)

  • National Securities Depository Limited (NSDL) is an Indian central securities depository based in Mumbai.
  • It was established in August 1996 as the first electronic securities depository in India with national coverage.
  • It was established based on a suggestion by a national institution responsible for the economic development of India .



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