SPIKE IN FOREIGN FLOWS INTO MARKET

MASSIVE SPIKE IN FOREIGN FLOWS INTO MARKET 

Foreign portfolio investors (FPIs) bought shares worth Rs. 20, 814 crore in just five trading sessions in the current month. 

It is the highest in any month of 2020

Market participants are of the view that the sudden surge was on account of the rights issue of Reliance Industries Limited (RIL), the stake sale in Kotak Mahindra Bank, and the slight uptick in optimism

Foreign portfolio investment: It is a grouping of assets such as stocks, bonds, and cash equivalents. 

In foreign portfolio investment the investor purchases stocks, securities and other financial assets but does not actively manage the investments or the companies that are issuing the assets. 

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

 

FPI the investor does not have direct control over the securities or businesses. 

FPI tends to be more liquid and less risky than FDI. 

Foreign portfolio investments can be made by individuals, companies, or even governments in international countries. 

Equity investments where the owner holds less than 10% of a company's shares are classified as portfolio investment. These transactions are also referred to as "portfolio flows" and are recorded in the financial account of a country's balance of payments. 

Foreign portfolio investment is positively influenced by high rates of return and reduction of risk through geographic diversification.

The returns on foreign portfolio investment can come from interest payments, non-voting dividends, increases in the market value of securities held in the portfolio, the foreign currency becoming stronger relative to the home currency, or some combination of the previous factors.