foreign-investors-sell-over-1-lakh-cr-securities-in-a-month

Context: In a maiden event for Indian capital markets, foreign portfolio investors (FPIs), in a month,  have sold securities that amount over ₹1 lakh crores.

More on news

  1. National Securities Depository Limited (NSDL),data reveals that the cumulative net outflow from the debt and equity segments stood at ₹1.18 lakh crore in March, 2020.
    1. If put in perspective, it amounts to more than double the previous high of ₹44,000 crore that was witnessed in 2013.
    2. Also, both the equity and debt segments have individually registered new highs vis-a-vis monthly outflows too.
  2. The impact of the record sales by foreign portfolio investors (FPIs) has been clearly visible in the stock markets with Sensex falling to its worst in the last 11 years.

 

National Securities Depository Limited

  • It is a securities depository in India which holds the securities of investors like shares, bonds and debentures in electronic format. 
  • It is the first and largest central securities depository in India that was established to sort out the issues associated with the paper-based settlement of securities such as bad delivery and delayed transfer of title.
  • NSDL was established in I996, after the enactment of Depositories Act, 1996, to facilitate trading and settlement of securities in electronic format. 
  • It enabled the investors to transfer the ownership of securities through simple account transfer without involving in paperwork. 
  • It is headquartered in Mumbai, India.

Foreign portfolio investment (FPI)

  • Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. 
  • 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.

Concerns due to COVID-19

  • The outbreak of COVID-19 pandemic is seen as the primary reason for such record outflows as emerging markets, and riskier assets do not find much takers in foreign investors.
    • An increase in the number of new cases in India has added to investor’s concerns.

A breather

  • The buying of securities  by Domestic institutional investors (DIIs), comprising banks, insurance companies, mutual funds and domestic financial institutions, has been acting as a strong counter force to the selling by foreign investors.

Source: https://www.thehindu.com/business/foreign-investors-sell-over-1-lakh-cr-securities-in-a-month-for-first-time-in-history/article31252148.ece

Image Source: The Hindu