Despite sustained net selling by foreign portfolio investors in Indian equities, new FPI registrations with SEBI have surged sharply, signalling fresh interest in India as an investment destination. The trend reflects growing appetite among global funds to gain access to Indian capital markets even as existing FPIs trim positions. SEBI remains the sole regulator for FPI registration, operating through designated depository participants who process applications under the SEBI FPI Regulations, 2019.

Foreign Portfolio Investors are regulated entities that invest in Indian securities — equities, bonds, hybrid instruments — without taking controlling stakes (unlike FDI). SEBI introduced the FPI Regulations in 2019, consolidating earlier FII and QFI categories into a single, simplified FPI framework.

Registration is mandatory before any investment and happens through Designated Depository Participants (DDPs), who act as SEBI's agents. FPIs are classified into two categories post the 2019 simplification: Category I (government entities, central banks, sovereign wealth funds, multilateral organisations) and Category II (regulated funds, university endowments, insurance companies, and others). The earlier Category III was abolished.

The surge in new registrations despite net outflows is significant because it separates two distinct signals: existing FPIs may be de-risking from India-specific positions due to global macro factors (strong dollar, US Fed policy), while new entrants see a structural, long-term opportunity — particularly in sectors like infrastructure, financials, and manufacturing.

For exam purposes, the regulatory architecture matters: SEBI is the regulator; DDPs are the intermediary; RBI governs the permissible instruments and investment limits under FEMA. FPIs can invest up to 24% of a company's paid-up capital by default, extendable to sectoral FDI cap with board approval. In government securities, FPI investment limits are set by RBI in coordination with SEBI.