FPI exodus continues, Rs 62,800 cr pulled out from equities in first fortnight of June
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims·
Why in news
FPIs withdrew a record Rs 62,853 crore from Indian equities in the first fortnight of June, driven by interest rate uncertainty and high domestic valuations.
Background
Foreign Portfolio Investors (FPIs) pulled out Rs 62,853 crore from equities in the first two weeks of June. Conversely, FPIs invested over Rs 13,200 crore in debt securities via the Fully Accessible Route (FAR).
Facts for Prelims
- FactFPI equity withdrawal: Rs 62,853 crore in the first fortnight of June.
- FactFPI debt investment: Rs 13,200 crore via Fully Accessible Route (FAR).
- S&TFAR (Fully Accessible Route): A mechanism allowing FPIs to invest in government securities without specific limits.
For Mains
Q. Analyze the factors influencing the volatility of Foreign Portfolio Investment (FPI) flows in emerging economies and suggest measures to stabilize capital markets.
Dimensions to cover in your answer
- Valuation disparity: High domestic equity valuations relative to other emerging markets deterring long-term FPI retention.
- Monetary policy sensitivity: Investor flight triggered by global interest rate uncertainty and 'safe haven' seeking.
- Debt-Equity divergence: Shift toward debt securities via FAR indicating risk-aversion in equity markets.
Keywords: Capital Flight · Portfolio Investment · Market Volatility · Emerging Markets · Monetary Policy
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