FPIs trim holdings ahead of deadline on concentrated holdings
- September 7, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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FPIs trim holdings ahead of deadline on concentrated holdings
Sub :Eco
Sec : Capital market
Context:
- Foreign portfolio investors are given a September 9 deadline by SEBI to offload their India holdings that breach the regulator’s norms for concentrated holdings.
- Non-compliant FPIs that offload their holdings post this date will be levied a penalty of 5 percent on their sale proceeds.
Holding Norms
- In a circular issued in August last year, SEBI had listed out two criteria for concentrated holdings.
- This included FPIs holding more than 50 per cent of their Indian equity assets under management in a single Indian corporate group or FPIs that individually, or along with their investor group, holding more than ₹25,000 crore of equity in Indian equities.
- Such FPIs had to provide granular details of all entities holding any ownership, economic interest or exercising control in the FPI.
Foreign Portfolio Investment (FPI)
- It consists of securities and other financial assets passively held by foreign investors.
- It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market. Therefore, it is also called Hot money.
- It is part of a country’s capital account and is shown on its Balance of Payments (BOP).
- Examples of FPIs include stocks, bonds, mutual funds, exchange traded funds, American Depositary Receipts (ADRs), and Global Depositary Receipts (GDRs).
Foreign Direct Investment (FDI)
- It is an investment made by a firm or individual in one country into business interests located in another country.
- It lets an investor purchase a direct business interest in a foreign country.
- Example: Establishing a subsidiary in another country, acquiring or merging with an existing foreign company, or starting a joint venture partnership with a foreign company.