Retail investors protect equity markets, says FM
NEW DELHI: Retail investors have vested confidence in the Indian stock markets and are protecting them from volatility that could arise from fund flows of foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) into and out of the country, finance minister Nirmala Sitharaman said in the Lok Sabha on Monday.
Foreign investments coming into India should be gauged not just by investments from FIIs and FPIs, which by their very nature depend on interest rates and keep fluctuating, the minister said during Question Hour. FIIs and FPIs can be very tempted by interest rates and prospects elsewhere, she said.
The test was whether foreign direct investment (FDI) inflows continue even during instances such as the Covid pandemic as this indicates if the money coming in is staying invested in this country and is creating jobs, Sitharaman explained.
“With fairness and objectivity, if the inflow of FDI remains unabated and India is the highest receiver of FDI since before covid and it continues significantly even during covid and subsequently also, that indicates that the money coming in is staying invested in this country, thereby creating jobs and prospects for us, and not FIIs and FPIs,” the minister said.
FIIs and FPIs may come and go but Indian retail investors have proven that any shock that may come because of FII-FPI fund flows is now taken care of because of the shock absorbing capacity that retail investors have brought to the market, Sitharaman said. “I think we as a House should stand up and appreciate Indian retail investor who has invested a lot confidence in the market,” she said.
The finance ministry has for long tried to deepen and broaden the financial markets so that households move away from unproductive assets such as gold to financial savings. This also helps bring liquidity to the market and address the financing needs of corporations.