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Consider the following statements about Foreign portfolio investment (FPI) in India.
  1. It is any equity investment by non-residents which is less than or equal to 50% of capital in a company.
  2. As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities.
  3. According to SEBI rules, investors are prohibited from investing in government bonds.
Which of the above statements is/are correct?
  • a)
    1, 2 
  • b)
    2 only 
  • c)
    1, 3 
  • d)
    1, 2, 3
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements about Foreign portfolio investment (...
Understanding Foreign Portfolio Investment (FPI) in India
Foreign Portfolio Investment (FPI) plays a crucial role in the Indian economy, allowing non-resident investors to participate in the Indian financial markets. Let’s examine the statements in question:
Statement 1: FPI Definition
- FPI refers to any equity investment by non-residents, but the notion that it must be less than or equal to 50% of capital in a company is incorrect.
- FPI can involve multiple investment patterns, and it is not capped at a specific percentage for being classified as FPI.
Statement 2: SEBI Regulations on Unlisted Shares
- This statement is correct. According to SEBI regulations, FPIs are strictly prohibited from investing in unlisted shares and unlisted entities.
- This regulation is aimed at maintaining a structured investment landscape and protecting the interests of both investors and the market.
Statement 3: Investment in Government Bonds
- This statement is incorrect. SEBI allows FPIs to invest in government bonds among other securities.
- Government bonds are considered a stable investment option, and FPIs are actively encouraged to invest in them as part of their portfolio diversification.
Conclusion
Based on the analysis:
- Statement 1 is incorrect.
- Statement 2 is correct.
- Statement 3 is incorrect.
Therefore, the only correct statement is option 'B', which states that "2 only" is correct. This highlights the importance of understanding FPI regulations accurately for informed investment decisions.
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Consider the following statements about Foreign portfolio investment (FPI) in India. It is any equity investment by non-residents which is less than or equal to 50% of capital in a company. As per SEBI regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities. According to SEBI rules, investors are prohibited from investing in government bonds.Which of the above statements is/are correct?a)1, 2b)2 onlyc)1, 3d)1, 2, 3Correct answer is option 'B'. Can you explain this answer?
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