Foreign Portfolio Investment (FPI)

SC directs Mahua Moitra to approach SEBI: The Supreme Court has instructed MP Mahua Moitra to petition SEBI regarding transparency issues within Foreign Portfolio Investors (FPIs) and Alternative Investment Funds (AIFs).

Transparency Concerns: The petition highlights concerns that opaque structures of AIFs and FPIs could lead to market manipulation, money laundering, and tax evasion, unlike the transparency norms for mutual funds.

Rapid Growth of AIFs: The petition notes the significant growth of AIFs registered with SEBI, increasing 30-fold from 42 in March 2013 to over 1,528 in March 2025.

AUM Surge: Assets Under Management (AUM) of AIFs have increased dramatically, from ₹1,437 crore in March 2013 to nearly ₹13 lakh crore in December 2024.

Large FPI Holdings: The current Assets Under Custody (AUC) of registered FPIs in India was over ₹74 lakh crore as of January 2025.

FPI Definition: Foreign Portfolio Investment (FPI) involves foreign entities investing in financial assets (stocks, bonds) without controlling the business.

FPI Characteristics: FPI is a passive, short-term investment sensitive to market sentiments and enhances market liquidity.

FPI Regulation in India: SEBI regulates FPIs, and a foreign investor holding over 10% of an Indian company’s capital is classified as FDI.

AIFs Overview: Alternative Investment Funds (AIFs) are privately pooled investment vehicles for specialized investments, regulated by SEBI.

AIF Categories: AIFs are categorized into Category I (priority sectors), Category II (diversified strategies), and Category III (high-risk investments).