A collision is said to be an inelastic collision if the sum of kinetic energies of the particles after the collision is not the same as the sum of kinetic energies of the particles before the collision.
A collision is said to be perfectly inelastic if the particle sticks permanently together on the impact and the loss of kinetic energy is maximum.
The material which experiences a highly inelastic collision is a lump of clay because the lump of clay would stick together, thereby resulting in a maximum loss of kinetic energy.
Hence, option 2 is the correct choice.