Portfolio Investment is an investment in financial assets such as stocks, bonds, and mutual funds, made by investors who are not seeking to control or manage the company. Foreign Direct Investment (FDI) involves gaining control or significant influence over a foreign enterprise. ADRs and GDRs represent foreign ownership of domestic company shares traded internationally, fitting the definition of portfolio investment. The key feature of Masala Bonds is that the currency risk lies with the investor (the bondholder) and not the issuer (the Indian entity). This protects Indian companies from currency fluctuations when raising foreign capital.
Consider the following: 1. Foreign Direct Investments 2. Foreign Institutional Investments 3. American Depository Receipts 4. Global Depository Receipts In the context of the ‘Sources of Foreign Exchange Reserves’, which among the above are placed under Portfolio Investment?
Asked in GS 32 2023 IS DEEO 1505 2024 · Topic: External Commercial Borrowings (ECB) (Currency of Borrowing: Foreign Currency ECB vs. Rupee Denominated ECB (Masala Bonds))
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