Question

The purchase of shares and bonds of Indian companies by Foreign Institutional Investors is called:

• A. Foreign Direct Investment
• B. Portfolio Investment
• C. NRI Investment
• D. Merger and Acquisition

Hint:

Differentiate between FDI (control/influence) and portfolio investment (financial investment without control).

Answer 1

The Correct Option is B

Step 1: Foreign Institutional Investors (FIIs)
FIIs are investors or investment funds from abroad who invest in financial assets like shares and bonds in Indian companies.
Step 2: Portfolio Investment
This is a type of investment where investors buy securities but do not have control over the companies. They seek returns from dividends and capital gains.
Step 3: Other options
- Foreign Direct Investment (FDI) involves direct control or management of businesses.
- NRI Investment refers to investments by Non-Resident Indians.
- Mergers and Acquisitions involve combining or purchasing companies, different from portfolio investment.
Thus, Option (B) Portfolio Investment is correct.