Foreign Portfolio Investment
Consider the following statements with reference to the Foreign portfolio investment (FPI):
- Foreign portfolio investment consists of securities and other financial assets passively held by foreign investors.
- It does not require any transfer of IP, technology or know-how.
- Portfolio investments are more accessible for the average investor than direct investments because they require much less investment capital and research.
Which of the statement(s) is/are correct?
Your Ans is
Right ans is D
View Explanation
Explanation :
Context: Post Union Budget 2021-22 presentation, the Sensex has risen 11.36%, , due to increased Foreign Portfolio Investments (FPIs).
- Foreign portfolio investment (FPI) consists of securities and other financial assets passively held by foreign investors.
- It does not provide the investor with direct ownership of financial assets and is relatively liquid depending on the volatility of the market.
- Examples of FPIs include stocks, bonds, mutual funds, exchange traded funds, American Depositary Receipts (ADRs), and Global Depositary Receipts (GDRs).
- Unlike FDIs, a Financial Portfolio Investment does not require any transfer of IP, technology or know-how. There is no need to enter a joint venture with a partner company.
- Portfolio investments typically have a shorter time frame for investment return than direct investments. As with any equity investment, foreign portfolio investors usually expect to quickly realize a profit on their investments.
- As securities are easily traded, the liquidity of portfolio investments makes them much easier to sell than direct investments.
- Portfolio investments are more accessible for the average investor than direct investments because they require much less investment capital and research.
