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Foreign Portfolio Investment

Definition of Foreign Portfolio Investment

A Foreign Portfolio Investment includes stocks, bonds, ETFs, derivatives, and other financial instruments from another country. Generally, FPIs do not give an investor the right to ownership or a controlling stake in any organization. Instead, FPIs act as a passive income vehicle. That’s why FPIs are different to Foreign Direct Investment (FDI) in which an ownership stake is acquired with the intention of controlling and influencing business decisions.

Related Terms

Lead Underwriter

The lead underwriter is a financial institution that is in charge of ensuring that an IPO is successful on the primary market. Companies may also hire lead underwriters to carry out a FPO.

Exit Load

Exit load is a type of premature withdrawal fee that mutual funds charge. The goal of charging an exit load is to ensure that investors think twice before exiting a fund, as premature withdrawals can affect existing investors.

Every mutual fund charges a different exit load based on the discretion of the fund manager. ETFs, liquid funds, and other debt funds typically have little to no exit load whereas equity funds do.

Liquidity Ratio

The Liquidity Ratio is a tool in financial analysis for measuring a company’s ability to fulfil short-term debt obligations without the need to secure external financing. The key term here is liquidity.

Equity Shares

Equity shares is a term used to describe stock of a company that’s issued via an Initial Public Offer (IPO), already issued and traded on the stock market, or freshly available through a Follow on Public Offer (FPO).

For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.

Debt To Equity Ratio

The debt to equity ratio is a measure of a company’s financial health that’s calculated by dividing liabilities from shareholder equity.

Debt to equity ratio: Total liabilities / Shareholder equity

A high debt to equity ratio means that a company is taking on more debt to run its business. A low debt to equity ratio means that a company is operating at low debt.

That’s why investors calculate the D/E ratio to understand a company’s ability to operate without debt. Generally, D/E is used for comparative analysis within sectors, not across industries because the ideal debt ratio may vary.

Call Option

A call option is a type of derivative contract that gives the right but not the obligation to buy an underlying asset like shares, commodities, currencies, and others at a pre-agreed price and date.

There are three components to a call option:

  • Premium: the price paid to buy a call option
  • Strike price: the pre-agreed price of the underlying asset
  • Expiration date: the day after which the option contract will be worthless



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SEBI Stock Broker Registration No: INZ000006031 | Depository Participant (CDSL) ID: IN-DP-289-2016
Exchange Membership No. : NSE: 90133 | BSE: 6593 | MCX: 56320
Registered Office: Unit No. 2201, 22nd Floor, Gold Medal Avenue, S.V. Road, Beside Patel Petrol Pump, Piramal Nagar, Goregaon West, Mumbai – 400104
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In case of grievances for any of the services rendered by Raise Securities Private Limited, please write to grievance@dhan.co (for NSE, BSE and MCX) or grievancedp@dhan.co (for Depository Participant). Please ensure that you carefully read the Risk Disclosure Document as prescribed by SEBI, our Terms of Use and Privacy Policy. Compliance Officer: Mr. Manish Garg and Mobile: 8655740961 Email: complianceofficer@dhan.co To lodge your complaints using SEBI SCORES, click here.


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Attention investors:

  1. Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020.
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