Long-term players have been raising their bets on India.
Illustration: Dominic Xavier/Rediff
Entities controlled by governments — sovereign wealth funds, and pension funds — have recorded higher growth in equity assets under custody compared to other foreign portfolio investors (FPIs) over the past five years.
Overall, FPI assets have grown 139.5 per cent since August 2020, while sovereign wealth fund investments have grown 155.2 per cent.
Investments by pension funds and international or multilateral organisations or agencies have grown even faster.
The Securities and Exchange Board of India (Sebi) announced earlier this month that it was making it easier for certain FPIs to invest in India.
This includes the entities listed above, in addition to central banks and entities controlled or at least 75 per cent owned by government and government-related investors.
Four out of the five key categories for which clear data was available have seen equity holdings rise faster than their peers.
Entities like sovereign wealth funds and pension funds are seen as sources of stable inflows that typically invest for the long term.
The regulator announced changes, including easier know-your-client regulations and exemptions from foreign venture capital investor (FVCI) registration, to allow for easier investment across unlisted and listed companies — among other measures — under the single window automatic and generalised access for trusted foreign investors (or SWAGAT-FI) framework.
“This initiative seeks to reduce regulatory complexity, simplify compliance, and enhance India’s global competitiveness as an investor-friendly destination,” the Sebi statement said.
FPIs have been net sellers to the tune of Rs 20,877 crore in 2025-26. They have been net buyers of just over Rs 72,500 crore in equity markets on an aggregate basis in the five-year period ended August.
Mutual funds alone recorded net purchases of Rs 4.79 trillion in 2024-25.
FPI assets under custody have broadly risen from around s 29 trillion to over Rs 70 trillion now, mainly because markets have gained during the interim, driven by record domestic investments.
“These steps will only help if they have made up their mind based on fundamentals,” said U R Bhat, cofounder and director at Alphaniti Fintech.
While overall economic growth has been resilient relative to the rest of the world, earnings are yet to pick up, and valuations are relatively expensive.
Markets are likely to correct on the margin, which may make it attractive for FPIs to invest in a few months, when tariff issues with the US are also expected to be eventually resolved.
Previously, only GIFT City funds could accept 100 per cent contributions from non-resident Indians (NRIs), while FPIs from other jurisdictions faced a 50 per cent cap, said Shikhar Kacker, partner at Khaitan & Co.
The SWAGAT-FI framework extends this benefit to all low-risk category investors, such as government-related and public retail FPIs.
This allows eligible FPI structures to channel NRI funds into Indian markets, creating a larger conduit for such investments.
The framework also enables single-window registration as both FPI and FVCI, operation through a single demat account, and simplified KYC norms — measures that significantly ease investments across listed and unlisted spaces.
“It’s a positive message to the market and a significant step towards simplifying onboarding and compliance for verified low-risk foreign investors,” Kacker added.
The move is expected to be implemented over the next six months.
Ninety new FPIs were registered on a net basis in the first four months of the year, according to Sebi data — or 23 per month.
This was lower than the 59 per month added during 2024-25, but higher than in the previous year and the pre-pandemic year of 2018-19.
The total number of registered FPIs stood at 12,164, according to the latest Sebi bulletin.
