Finance and Corporate Affairs Minister Nirmala Sitharaman said on Tuesday that India’s growing flock of retail investors in the stock market have emerged as a ‘shock absorber’ amid an exodus of funds from foreign portfolio investors or FPIs.
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The last eight months have seen a persistent decline in FPI exposures to Indian equities, with May 2022 recording an outflow of $5.7 billion, the highest since March 2020.
“If FPIs are going away and giving us the feeling that funds are going out of India, retail investors have come in a big way that they seem to act like the shock absorbers,” Ms. Sitharaman said after inaugurating the iconic week celebrations of the Corporate Affairs Ministry.
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“If FPIs went away, our market did not really have to go through ups and downs in a very distinct way, [that is] because the small investors have entered in a big way… I am very happy to be able to say that they are coming into the market with greater awareness,” she said, noting that the significant increase in retail investors’ base occurred during the COVID-19 pandemic.
Ms. Sitharaman urged regulators to pay adequate attention to the evolving risks and challenges of a digital ecosystem. “You should work with experts to strengthen and make robust your firewall mechanism, or else the digitisation which made our life easy, can itself become the biggest handicap if we are not able to prevent any unforeseen disaster,” she warned.
The Minister also unveiled a Single Nodal Agency (SNA) Dashboard of the Public Financial Management System at a separate event, which Finance Secretary T.V. Somanathan said had led to ‘complete visibility of money reaching the end beneficiary’ for the Department of Expenditure.
“The float of funds could be reduced and thus, interest costs are saved, and these steps are helpful in containing the fiscal deficit in challenging times like now,” Mr. Somanathan said, adding that it was a centralised system, yet gave freedom to States and agencies in implementing schemes.