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NISM Certifications · NISM-Series-VI: Depository Operations · Foreign Portfolio Investors (FPI)

Mr. Rao, a DP official, is asked by an FPI client whether it may buy shares of an Indian company in the primary market and the secondary market. Which is correct for an FPI investing in equity of an Indian company?

An FPI may subscribe to shares in public issues and buy them in the secondary market, provided it stays within the individual and aggregate FPI limits for the company. It is not restricted to secondary trades, unlisted firms or mutual fund units.

  1. AThe FPI may invest in both, subject to the aggregate FPI limit prescribed for that companyCorrect
  2. BThe FPI may invest only in the secondary market
  3. CThe FPI may invest only in unlisted companies
  4. DThe FPI may invest only through mutual fund units

Explanation

FPIs may purchase shares in primary issues and in the secondary market, subject to the individual and aggregate investment limits applicable to the investee company. The other statements impose restrictions that do not exist.

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