Foreign Portfolio Investment

Foreign Portfolio Investment (FPI) refers to the investment made by foreign entities — including hedge funds, sovereign wealth funds, pension funds, mutual funds, and foreign banks — in Indian financial assets such as listed equity shares, government bonds, corporate bonds, and money market instruments, without acquiring significant management control or operational influence over the investee company. FPIs are registered with SEBI and are among the most significant participants in Indian capital markets, with aggregate holdings in Indian equities representing approximately 15% to 20% of total market capitalisation. FPI flows are a critical driver of short-term market direction in India — strong FPI inflows typically support rupee appreciation and equity market rallies, while FPI outflows (driven by global risk-off sentiment, US dollar strengthening, or rising US yields) often trigger market corrections and currency weakness. SEBI regulates FPI activity under the SEBI (Foreign Portfolio Investors) Regulations, 2019.