Identify the source/example of Portfolio Investment being part of Capital Account item of Balance of Payments.

Investment made by foreign institutional investors in the stock market

The correct answer is option (3) : Investment made by foreign institutional investors in the stock market

Portfolio Investment refers to investments made by foreign institutional investors (FIIs) in the stock markets of a country. This type of investment is categorized under the Capital Account of the Balance of Payments because it involves financial assets like stocks and bonds rather than physical assets or direct control over production facilities (which would fall under Direct Investment). Portfolio investments are more liquid and are generally made with the expectation of financial return rather than for controlling interests in the invested entity.