Buoyant market spurs FPI registrations; number crosses 10K for first time

Equities in India saw record FPI inflows of $16.8 billion in November and December, taking the benchmark indices to new highs
New registrations of foreign portfolio investors (FPIs) saw an uptick in December as buoyant market conditions have spurred the setting up of funds focused on India and emerging markets.

The month saw more than 100 registrations after seven months. The number of FPIs crossed the 10,000 mark for the first time, the data from NSDL and PRIME Database shows. The Securities and Exchange Board of India (Sebi) data puts the number at 10,656, including deemed FPIs.

Investors registered as foreign institutional investors (FIIs) and their sub-accounts under the older regulatory regime were deemed FPIs when the rules changed.

Equities in India saw record FPI inflows of $16.8 billion in November and December, taking the benchmark indices to new highs. The number of registrations had dropped significantly after the pandemic set in owing to operational matters and the uncertainties surrounding the markets.

“The recent buoyancy in FPI registrations mirrors the buoyant flows into Indian capital markets. Emerging markets in general and India in particular have rebounded sharply and witnessed a significant interest from investors. Many global funds, especially emerging market-focused funds, are queuing up for FPI registration,” said Nehal Sampat, executive director, financial services, PwC India.

New monthly registration averaged more than 100 this year until April, before dipping to 31 and 36 in May and June, respectively. Subsequent months showed improvement but the number dipped again in October to 38.

According to experts, work from home, volatility in stock markets worldwide, and redemption pressure compelled investors to defer investment plans. Consequently, the number of new FPI registrations witnessed a dip as well due to lockdown-like conditions and economic uncertainties globally.

“The pace of new registration has been slow in the past few months, which could be due to challenges due to Covid, lower FPI investment in debt, as well as higher allocation to P-notes (participatory notes). However, registration picked up in December and we could see continued buoyancy in the current calendar,” said Rajesh H Gandhi, partner at Deloitte Haskins & Sells.

Participatory notes allow investors to invest in Indian markets without registering as an FPI. The value of equity and debt holdings through the route was the highest since June 2018, shows the depository data.

Sebi, on its part, had eased the registration process by allowing new FPIs to submit scanned copies of documents.

In September, Sebi extended the relaxation provided to FPIs and custodians for processing documents related to new investor registration if they belonged to jurisdictions still under a lockdown. Most custodians in Mumbai were working from home, hampering their ability to access documents. 

According to the relaxation, custodians are allowed to process requests for registration, continuance, KYC review, and other material change on the basis of scanned versions of signed documents (instead of the originals) as well as copies of documents that are either not certified or have been received from email IDs of their global custodians’ existing clients.

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