FPI outflows refer to the withdrawal of investments by Foreign Portfolio Investors from a country's financial markets. This trend often signals investor...
FPI outflows occur when Foreign Portfolio Investors (FPIs) sell their holdings in a country's stock and bond markets and repatriate the funds, reducing foreign capital in the domestic economy.
Common causes include rising interest rates in developed markets, global risk aversion, domestic economic instability, political uncertainty, and adverse regulatory changes in the host country.
FPI outflows can lead to a decline in stock market indices, currency depreciation, increased borrowing costs, and a potential reduction in overall economic growth due to capital flight.
While often viewed negatively, moderate outflows can sometimes signify profit-taking or portfolio rebalancing. However, sustained large outflows typically indicate a loss of investor confidence and pose economic challenges.