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Foreign Portfolio Investors betting on India

Published: 16 Jan 2018

India is undoubtedly developing as among the most favorable destinations for foreign investors to invest and conduct business. Foreign Investors are queueing up to Indian capital markets like never before with the objective to explore and capitalize the prospects offered by India.

Of late, there has been an outstanding rise in registration of Foreign Portfolio Investors (FPI) which substantiates and vindicates the ease of doing business sentiment in India.

According to the official reports, 1,200 FPIs registered with the Securities and Exchange Board of India (SEBI) during the period (April-November 2017) – this brings the total number of registered FPI to 8,991.

Foreign Portfolio Investor is an investor who acquires stocks, bonds or other financial assets in an overseas country and does not have direct ownership over the financial assets.

The significant reasons for this upsurge in registration of FPIs are as follows:

·       Ease of doing business sentiment backed up by the government strong reforms with the intent of making certain procedures flexible and easily approachable to foreign investors.

·       One time registration procedure is established to accord permanent registration on FPI’s (except registration suspended by SEBI or surrendered by FPI) unlike earlier FPIs were authorized to invest in the Indian markets for one or five years subject to the approval granted by the relevant authority.

·       Uplift of the FPIs’ investment limit for government debt to facilitate FPIs to invest in unlisted corporate debt and securitized debt instruments and permitted direct entry to well-regulated foreign investors to invest in corporate bonds.

·       Reducing to bare bones entry norms for FPIs willing to invest in the Indian markets.

·       Certain result oriented reforms taken by SEBI in its regulations with the intent to encourage foreign investors to drive foreign reserves into Indian capital markets.

·       FII (foreign institutional investors) are obliged to register as FPI due to the end of FII regime.

·       Foreign Investors enhanced interest in acquiring Indian capital market securities/instruments.

It is evident that all the reforms formulated by the government and SEBI with the object of developing India into favorable destination to foreign investors have started to pay dividends.

In 2018 one can hope for further upsurge in flow of capital reserves into capital markets through channel of foreign investors further strengthening the sentiment of ease of doing business in India. This is a positive sign for Indian economy.

Research and inputs by Paruchuri Baswanth Mohan

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About the author :

Bhumesh Verma is a Corporate Lawyer with over 2 decades of experience in advising domestic and international clients, with a place in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters. He can be reached at bhumesh.verma@corpcommlegal.com.

Bhumesh Verma

Firm: Corp Comm Legal
Country: India

Practice Area: Contract

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