SEBI has announced merger of different classes of foreign investors Consider the following statement...........

Economic Affairs Financial Institutions

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SEBI has announced merger of different classes of foreign investors. Consider the following statements in this context.

1. All existing FIIs, QFIs and FDIs will be merged into new category called Foreign Portfolio Investor.

2. There will be only three categories in FPIs based on quantum of risk involved.

Which of the statements given above is/are correct?

1 Only

2 Only

Both 1 and 2

Neither 1 nor 2

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Explanation:

1st statement is incorrect.
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. Foreign portfolio investment differs from foreign direct investment (FDI), in which a domestic company runs a foreign firm, because although FDI allows a company to maintain better control over the firm held abroad, it may face more difficulty selling the firm at a premium price in the future.