Research paper impact fii indian stock market

Research paper impact fii indian stock market

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A PROGRAMME Affiliated to Gujarat Technological University Ahmadabad DECEMBER 2. It exposes us to the process of identifying, systematizing and exploring specific problems or issues. This process fosters creation of new knowledge and expansion of existing framework of knowledge. To get acquainted with the theoretical aspects of management and the practical implications of theory is greatly valuable for us.

An analysis of the direction of causality to understand the possible devastating effect of volatility of FII flows on the Indian Stock Market is important. The present empirical study has been undertaken to throw some light on the cause and effect relationship between FII flows and Indian stock market returns. We felt that the utility of the report could further enhance by widening its coverage and updating its contents wherever necessary. We hope this report will provide necessary information.

Comprehensive project is the golden opportunities for the every student of the management 3. First of all, we would like to Thank Dr. Monical verma for providing us initial guidance regarding the framework of project. We would like to express our thanks to Dr. Monica Varma who has not just continuously guided us but taught us new concepts and made our journey of preparing for project more interesting.

His invaluable and significant guidelines improved our outlook in making our project a real learning experience. He also encouraged us to put in our best efforts and bring out the best of ourabilities. We are also thankful to the whole staff of MEFGI and other faculties to whom we approach during our project. At last but not the least, we take an opportunity to appeal our profound gratitude to our adorable and beloved parents for their everlasting love, strong moral support, encouragement without which we were unable to reach the present status of education.

Regulation 2 f of the FII regulation The issue of whether FII flow affects stock market returns or the other way round is a matter of some controversy.

It has been perceived in some quarters that FII flows are the major drivers of stock markets in India and hence a sudden reversal of such flows may harm the stability of its markets. Contrary to this belief, it is viewed by others that FII flows react to the existing crisis in the stock market, possibly exacerbating it rather than causing it.

In light of these events, Grand Project taken up dealt with three objectives. One objective is to find out the cause and effect relationship between the FII and BSE, NSE.

Second, objective is to know how much FII and BSE,NSE affect each other through Regression. Third objective is to assess the growth and development of the Indian stock Market. Correlations between the two estimated variables' series are determined to have a preliminary understanding of the nature of relationship between stock market returns and FII flows. FII is defined as an institution organized outside of India for the purpose of making investments into the Indian securities market under the system prescribed by SEBI.

FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. Foreign institutional investor means an entity established or incorporated outside India which proposes to make investment in India.

Positive word about the Indian economy combined with a fast-growing market has made India an attractive destination for foreign institutional investors. FII is defined as an institution organized outside of India for the purpose of making investments into the Indian securities market under the regulations.

Foreign institutional investors play a very important role in any economy. These are the big companies such as investment banks, mutual funds etc, who invest considerable amount of money in the Indian markets. They exert strong influence on the total inflows coming into the economy. The FIIs are considered as both a trigger and a catalyst for the market performance by encouraging investment from all classes of investors which further leads to growth in financial market trends under a self-organized system.

FIIs are those institutional investors which invest in the assets belonging to a different country other than that where these organizations are based.

Foreign investments in the country can take the form of investments in listed companies i. An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. A Foreign Institutional Investors Registration Currently, entities eligible to invest under FII route are as follows A. The following entities are eligible to be registered as sub-accounts, viz.

Foreign portfolio investors are regarded as 'fair weather friends' who come in when there is money to be made and leave at the first sign of impending trouble in the host country thereby destabilizing the domestic economy of the recipient country. Accordingly, it is viewed that as securities markets in developing countries like India are narrow and shallow and as the foreign investors have command over D SEVERAL REASONS ON FIIs SELLING It is always good to keep an eye on what the big movers are doing and plan individual strategy accordingly.

There are several reasons on FIIs selling, but there are three predominant factors that are cited as being largely responsible. Some of the other markets include Uruguay, Russia, the Ukraine, and several other former Soviet countries. India is seen as a good investment for the medium to long term.

FIIs seem to fear the pace of growth and the fundamentals of the markets. Recent action taken by the market regulator indicates that the Indian government would like to moderate the inflow of FII money. In a common sense way, the impact of FIIs upon the cost of equity capital may be visualized by asking what stock prices would be if there were no FIIs operating in India.

FII investment reduces the required rate of return for equity, enhances stock prices, and fosters investment by Indian firms in the country. The excess of domestic investment over domestic savings result in a current account deficit and this deficit is financed by capital flows in the balance of payments. FIIs advocate modern ideas in market design, promote innovation, development of sophisticated products such as financial derivatives, enhance competition in financial intermediation, and lead to pullovers of human capital by exposing Indian participants to modern financial techniques, and international best practices and systems E.

FIIs, with their invest experience with modern corporate FII participation in domestic capital markets often lead to vigorous advocacy of sound corporate governance practices, improved efficiency and better shareholder value. First, when adverse macroeconomic news, such as a bad monsoon, unsettles many domestic investors, it may be easier for a globally diversified portfolio manager to be more dispassionate about India's prospects, and engage in stabilizing trades.

Second, at the level of individual stocks and industries, FIIs may act as a channel through which knowledge and ideas about valuation of a firm or an industry can more rapidly propagate into India. For example, foreign investors were rapidly able to assess the potential of firms like Infosys, which are primarily export-oriented, applying valuation principles that prevailed outside India for software services companies.

F Rationale for encouraging FII flows Foreign investment — both portfolio and direct varieties — can supplement domestic savings and augment domestic investment without increasing the foreign debt of the country. Such investment constitutes non-debt creating financing instruments for the current account deficits in the external balance of payments.

Capital inflows into the equity market give higher stock prices, lower cost of equity capital, and encourage investment by Indian firms. Foreign investors often help spur domestic reforms aimed at These benefits do require concomitant policy effort in terms of improving financial regulation and corporate governance. Sweden has moved ahead of Singapore and United States to claim 2nd position this year. Singapore, United States ,Netherland and Germany round out the top five. After having fallen four positions over the past two years, the United Kingdom moves up one spot to 10th place this year, with a stable performance.

India is GDP are high and good to Brazil and Russia but compares to china, Brazil and Russia we less received foreign investment. China are high 12 pillars and that china is high rank 28 in BRICS, After that Russia came 53rd GCI rank and second in BRICS,South Africa is 56th GCI rank and 3rd country in BRICS, Brazil 57th rank and 4th country in BRICS country and India is 71st country in GCI index through 12 pillars of GCI and it show that China is Developed country in BRICS country and India is developing country.

All of the BRIC country rankings either improve slightly or stay the same. China is to 28th place. Brazil 57th , India 71st , and Russia stays 53rd. According to a poll conducted by Bank of America Merrill Lynch BofA-ML recently, in which 50 investors participated, India was the most favourite equity market for the global investors for the year at 43 per cent, followed by China at 26 per cent.

The global investment bank is of the view that India remains to be in a structural bull market. India is poised to become the second biggest ecosystem option after the US in the next two years on account of the ongoing high growth rates. India continues to be a preferred market for foreign investors. Government Initiatives Government of India has accepted the recommendation of A.

Shah Committee to not impose minimum alternate tax MAT on overseas portfolio investors retrospectively for the years prior to April 01, , thereby providing significant relief to foreign portfolio investors FPIs. Long-term investors registered with SEBI will also be deemed as eligible investors From September 14, , with suitable restrictions, FIIs and Overseas Corporate Bodies OCBs were permitted to invest in financial instruments.

The Government guidelines of also provided for eligibility conditions for registration, such as track record, professional competence, financial soundness and other relevant criteria, including registration with a regulatory organisation in the home country.

The guidelines were suitably incorporated under the SEBI FIIs Regulations, With coming into force of the Foreign Exchange Management Act, FEMA , foreign exchange related transactions of FIIs were permitted by RBI.

Right from , FIIs have been allowed to invest in all securities traded on the primary and secondary markets, including shares, debentures and warrants issued by companies which were listed or were to be listed on the Stock Exchanges in India and in schemes floated by domestic mutual funds.

Furthermore, to ensure a broad base and prevent such investment acting as a camouflage for individual investment in the nature of FDI and requiring Government approval, funds invested by FIIs have to have at least 50 participants However, this was allowed to be increased subject to passing of resolution by the Board of Directors of the company followed by passing of a special resolution by the General Body of the company.

The ceiling limit under special procedure was enhanced in stages as follows: While the guidelines did not have a specific provision regarding clients, in the application form the details of clients on whose behalf investments were being made were sought.

While granting registration to the FII, permission was also granted for making investments in the names of such clients. The broad strategy consisted of having a wide variety of clients, including individuals, intermediated through institutional A Working Group for Streamlining of the Procedures relating to FIIs, constituted in April, , inter alia, recommended streamlining of SEBI registration procedure, and suggested that dual approval process of SEBI and RBI be changed to a single approval process of SEBI.

This recommendation was implemented in December Under eligibility conditions, the definition of broad based funds was relaxed in August, and in February, and newer entities, such as foreign firms were allowed to invest as sub-accounts. In order to have a level playing field in intermediation, domestic portfolio managers were allowed in February, to manage the funds of sub-accounts, so as to give end- customers a greater choice about the identity of their fund manager in India.

FIIs were initially allowed to only invest in listed securities of companies. Gradually, they were allowed to invest in unlisted securities, rated government securities, commercial paper and derivatives traded on a recognised stock exchange.

In this circular was further revised to include disclosure of more details about terms, nature and contracting parties. Moreover, investments were allowed only in debt securities of companies listed or to be listed in stock exchanges. Investments were free from maturity limitations.

From April , FII investments were also allowed in dated Government securities. Treasury bills, being money market instruments, were originally outside the ambit of such investments, but were included subsequently from May, SEBI Figure-1 growth of FII Positive impact: It has been emphasized upon the fact that the capital market reforms like improved market transparency, automation, dematerialization and regulations on reporting and disclosure standards were initiated because of the presence of the FIIs.

But FII flows can be considered both as the cause and the effect of the capital market reforms. The market reforms were initiated because of the presence of them and this in turn has led to increased flows. Enhanced flows of equity capital: FIIs are well known for a greater appetite for equity than debt in their asset structure.

For example, pension funds in the United Kingdom and United States had 68 per cent and 64 per cent, respectively, of their portfolios in equity in Not only it can help in supplementing the domestic savings for the purpose of development projects like building economic and social infrastructure but can also help in growth of rate of investment, it boosts the production, employment and income of the host country.

Managing uncertainty and controlling risks: FIIs promote financial innovation and development of hedging instruments. These because of their interest in hedging risks, are known to have contributed to the development of zero-coupon bonds and index futures. FIIs not only enhance competition in financial markets, but also improve the alignment of asset prices to fundamentals. FIIs in particular are known to have good information and low transaction costs.

By aligning asset prices closer to fundamentals, they stabilize markets. In addition, a variety of FIIs with a variety of risk-return preferences also help in dampening volatility. FIIs as professional bodies of asset managers and financial analysts enhance competition and efficiency of financial markets. Good corporate governance is essential to overcome the principal-agent problem between share-holders Information asymmetries and incomplete contracts between share-holders and management are at the root of the agency costs.

Bad corporate governance makes equity finance a costly option. With boards often captured by managers or passive, ensuring the rights of shareholders is a problem that needs to be addressed efficiently in any economy. Incentives for shareholders to monitor firms and enforce their legal rights are limited and individuals with small share-holdings often do not address the issue since others can free-ride on their endeavor.

Among the four models of corporate control - takeover or market control via equity, leveraged control or market control via debt, direct control via equity, and direct control via debt or relationship banking-the third model, which is known as corporate governance movement, has institutional investors at its core.

In this third model, board representation is supplemented by direct contacts by institutional investors. If we see the market trends of past few recent years it is quite evident that Indian equity markets have become slaves of FIIs inflow and are dancing to their tune. And this dependence has to a great extent caused a lot of trouble for the Indian economy. Some of the factors are: These investors scan the market for short-term, high interest rate investment opportunities.

Research paper impact fii indian stock market

When money is injected into a country, the If money is withdrawn on short notice, the banking institution will experience a shortage of funds. Huge amounts of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created. This situation leads to excess liquidity thereby leading to inflation where too much money chases too few goods. Problem to small investors: The FIIs profit from investing in emerging financial stock markets.

The FII buying pushes the stocks up and their selling shows the stock market the downward path. This creates problems for the small retail investor, whose fortunes get driven by the actions of the large FIIs.

research paper impact fii indian stock market

Adverse impact on Exports: FII flows leading to appreciation of the currency may lead to the exports industry becoming uncompetitive due to the appreciation of the rupee.

Issue related to participatory notes: When Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. Any entity investing in participatory notes is not required to register with SEBI Securities and Exchange Board Trading through participatory notes is easy because participatory notes are like contract notes transferable by endorsement and delivery.

Secondly, some of the entities route their investment through participatory notes to take advantage of the tax laws of certain preferred countries. Thirdly, participatory notes are popular because they provide a high degree of anonymity, which enables large hedge funds to carry out their operations without disclosing their identity.

The hedge funds borrow money cheaply from western markets and invest these funds into stocks in emerging economies. It is also feared that the hedge funds, acting through participatory notes, will cause economic volatility in Indian exchange and generally these are blamed for the sudden fall in indices.

Further, FIIs have contributed a lot in making Indian economy one of the fastest growing economy in the world today. Foreign institutional investment can play a useful role in development by adding to the savings of low and middle income developing countries. And India among the world inventors is believed to be a good investment destination inspite of all the political uncertainty and infrastructural inefficiencies.

After the liberalization of financial policies India has been able to attract a lot of FII from rest of the world and which in turn has played its part very well by helping in development of Indian economy from what it was in early s to a would But still the harsh consequences of FIIs should not be ignored by the government and further reforms should be introduced in the economic sector to counter the tendency of the FIIs to destabilize the emerging equity market.

And also attempts should be made to encourage small domestic investors to participate in the equity market. In and are positive investment In are again FII reduce their investment and gone up to In FII investment are In year FII investment is In June to November is show negative investment in debt. Financial year is equity and debt investment show positively.

In due to world recession FII has sale there investment and that show more sale in Indian market. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor.

Besides it also has to appoint a designated bank to route its Certified copy of the relevant clauses or articles of the Memorandum and Articles of Association or the agreement authorizing the applicant to invest on behalf of its clients. For effective monitoring of foreign investment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. The cut-off limit for companies with 24 per cent ceiling is 22 per cent and for companies with 30 per cent ceiling, is 28 per cent and so on.

Similarly, the cut-off limit for public sector banks including State Bank of India is 18 per cent. On reaching the aggregate ceiling limit, the Reserve Bank advises all designated bank branches to stop purchases on behalf of their FIIs clients. Asian Paints India Ltd 3. Capital Trust Ltd 4. Container Corporation of India 5. Ferro Alloys Corporation Ltd 6. Garware Polyester Ltd 7. Gujarat Ambuja Cements Ltd 9. Orchid Chemicals and Pharmaceuticals Ltd Pentasoft Technologies Ltd Pentafour Communications Ltd Polyplex Corporation Ltd Ranbaxy Laboratories Ltd Software Solutions Integrated Ltd Sonata Software Ltd The Credit Rating Information Services of India Ltd.

The Paper Products Ltd Vikas WSP Ltd Table no. Burr Brown India Ltd. Hero Honda Motors Ltd. Jyoti Structures Ltd 6. Maars Software International Ltd. Padmini Technologies Ltd 8. Pent media Graphics Ltd. Thiru Arooran Sugars Ltd.

Visual Soft Technologies Ltd Silver line Technologies Ltd. Ways India Ltd SSI Ltd Table no. Blue Dart Express Ltd HDFC Bank Ltd 4. Hindustan Lever Ltd 5.

Himachal Futuristic Communications Ltd 6. Panacea Biotec Ltd Sofia Software Ltd Sun Pharmaceutical Industries Ltd United Breweries Holdings Ltd. Zee Tele films Ltd.

Housing Development Finance Corporation Ltd. Digital Global Soft Ltd. In india approximately FII. As per December top 10 fii are following table Table no. The BSE has been in existence since The NSE, on the other hand, was founded in and started trading in However, both exchanges follow the same trading mechanism, trading hours, settlement process, etc. At the last count, the BSE had about 4, listed firms, whereas the rival NSE had about 1, Almost all the significant firms of India are listed on both the exchanges.

Both exchanges compete for the order flow that leads to reduced costs, market efficiency and innovation. The presence of arbitrageurs keeps the prices on the two stock exchanges within a very tight range. Trading Mechanism Trading at both the exchanges takes place through an open electronic limit order book, in which order matching is done by the trading computer.

There are no market makers or specialists and the entire process is order- driven, which means that market orders placed by investors are As a result, buyers and sellers remain anonymous. The advantage of an order driven market is that it brings more transparency, by displaying all buy and sell orders in the trading system. However, in the absence of market makers, there is no guarantee that orders will be executed.

All orders in the trading system need to be placed through brokers, many of which provide online trading facility to retail customers.

research paper impact fii indian stock market

Institutional investors can also take advantage of the direct market access DMA option, in which they use trading terminals provided by brokers for placing orders directly into the stock market trading system. This means that any trade taking place on Monday, gets settled by Wednesday. All trading on stock exchanges takes place between 9: Delivery of shares must be made in dematerialized form, and each exchange has its own clearing house, which assumes all settlement risk, by serving as a central counterparty.

It was created in and provides time series data from April , onward. The main Index of BSE is SENSEX. The other indices BSE , BSE , BSE , BSE PSU, BSE MIDCAP, BSE SMLCAP, BSE BANKEX, BSE Teck, BSE Auto, BSE Pharma, BSE Fast Moving Consumer Goods FMCG , BSE Consumer Durable SYMBOL: Cons Dura , BSE Metal.

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It was created in and provides time series data from July , onward. NSE main index is CNX Nifty. Since then, SEBI has consistently tried to lay down market rules in line with the best market practices.

It enjoys vast powers of imposing penalties on market participants, in case of a breach. India started permitting outside investments only in the s. Foreign investments are classified into two categories: All investments, in which an investor takes part in the day-to-day management and operations of the company, are treated as FDI, whereas investments in shares without any control over management and operations are treated as FPI.

For making portfolio investment in India, one should be registered either as a foreign institutional investor FII or as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth funds, insurance companies, banks, asset management companies etc. At present, India does not allow foreign individuals to invest directly into its stock market.

Foreign institutional investors and their sub accounts can invest directly into any of the stocks listed on any of the stock exchanges. Most portfolio investments consist of investment in securities in the primary and secondary markets, including shares, debentures and warrants of companies listed or to be listed on a recognized stock exchange in India. FIIs can also invest in unlisted securities outside stock exchanges, subject to approval of the price by the Reserve Bank of India.

Finally, they can invest in units of mutual funds and derivatives traded on any stock exchange. FIIs must use special non-resident rupeebank accounts, in order to move money in and out of India. The balances held in such an account can be fully repatriated. For related reading, see Re-evaluating Emerging Markets. Over a period of time, the government has been progressively increasing the ceilings.

However, there are two additional restrictions on portfolio investment. However, the same can be raised up to the sector cap, with the approval of the company's boards and shareholders.

Regulations also impose limits for investment in equity-based derivatives trading on stock exchanges. Many India-focused mutual funds are becoming popular among retail investors.

Investments could also be made through some of the offshore instruments, like participatory notes PNs and depositary receipts, such as American depositary receipts ADRs , global depositary receipts GDRs , and exchange traded funds ETFs and exchange-traded notes ETNs. As per Indian regulations, participatory notes representing underlying Indian stocks can be issued offshore by FIIs, only to regulated However, even small investors can invest in American depositary receipts representing the underlying stocks of some of the well-known Indian firms, listed on the New York Stock Exchange and Nasdaq.

ADRs are denominated in dollars and subject to the regulations of the U. Securities and Exchange Commission SEC. Likewise, global depositary receipts are listed on European stock exchanges. However, many promising Indian firms are not yet using ADRs or GDRs to access offshore investors. Retail investors also have the option of investing in ETFs and ETNs, based on Indian stocks. India ETFs mostly make investments in indexes made up of Indian stocks.

Most of the stocks included in the index are the ones already listed on NYSE and Nasdaq. As of , the two most prominent ETFs based on Indian stocks are the Wisdom-Tree India Earnings Fund NYSE: EPI and the Power Shares India Portfolio Fund NYSE: The most prominent ETN is the MSCI India Index Exchange Traded Note NYSE: Both ETFs and ETNs provide good investment opportunity for outside investors.

Kajal Gandhi May held that Foreign Institutional Inflows and Indian Stock Market Volatility. In this context these paper examine the dynamic linkage between foreign institutional investments and Indian stock market was examined by applying Grangers causality test.

The empirical study shows a causal relation of foreign institutional investments on Indian stock market. During recent times since FIIs are playing a dominant role in driving Indian stock market, they have almost one-third of all the assets under the custody of custodians in any period of time.

But they have a thirst for short term profitability for which they often mobilize funds. The results are however, are tentative and there is a need to undertake an in- depth research to address the issue.

In these context these paper examine empirical assessment of this claim using alternative liquidity measures. FIIs and the portfolio flows have certainly contributed to the growth of stock market activity in India.

Research Paper Impact Fii Indian Stock Market

Market capitalization, volume and value traded grew significantly along with FII flows. The results indicate that the foreign institutional trading significantly influences the market liquidity in a negative direction. An increase in the Gross Sales leads to an increase in the spread and the Illiquidity as measured by the Amihud illiquidity ratio and hence a decrease in future market liquidity. Similarly, an increase in Gross Purchases significantly reduces the future market liquidity.

They are seen as the cardinal constituents of the entire investment domain in the union of India. This study is carried out to measure their impact in a mathematical way, and to figure out whether they are the true market movers or not. This study is intended to measure the impact of FII, DII trading activity from September to October on BSE Adjusted R Square is most important in such a multivariate analysis, here it is found to be quite feeble 0.

It is tested that BSE does depend upon the DIIs period Sept to Oct Now the next question is, what the impact of DIIs in BSE is; is it strong or feeble. So, each data point has one residual. Rakesh Kumar Miss Sarita Gautam Octomber held that An Empirical Study on impact of FII and other stock exchanges volatility on BSE stock exchange volatility. In these context these paper examine the This analysis defined the degree as well as relationships among the factors.

Volatility of Stock market changed very rapidly, so except these others factors should also consider for research work. FII and Nikkei have an inverse relation whereas NASDAQ and FTSE have positive relations with the BSE SENSEX. When investors are trading in secondary capital market in this case they should consider these studied factors for the minimization of risk and increase the return. In these context these paper examine that investments by FIIs and the movements of Sensex are quite closely correlated in India and FIIs wield significant influence on the movement of sensex.

There is little doubt that FII inflows have significantly grown in importance over the last few years According to findings and results, I concluded that FII did have high significant impact on the Indian capital market. Therefore, the alternate hypothesis is accepted. However there are other major factors that influence the bourses in the stock market, but FII is definitely one of the factors.

Also BSE CG, BSE CD, and BSE IT showed positive correlation but BSE FMCG showed negative correlation with FII. The degree of relation was low in all the case. It shows low degree of linear relation between FII and other stock index. This implies that their impact on the stock prices varies from sector to sector which is further influenced by the industry to which it belongs to and the sectoral performance.

In these context these paper examine Compared to security markets in developed economies, Indian markets being narrower and shallower, allows foreign investors with access to significant funds, to become the dominant player in determining the course of markets.

Because of their over sensitive investment behavior and herding nature, FIIs are capable of causing severe capital out flight abruptly, tumbling share prices in no time and making stock markets unstable and unpredictable. In the process, more often than not, the domestic individual investors are on the receiving end, losing their precious savings in such outrageous speculative trading.

India as an emerging economic power cannot afford to be intimidated down by the FIIs every now and then. We need formidable Domestic Investors which can pump in liquidity even during cash crunch circumstances thereby fuelling the development. The foreign investment in India should be encouraged, but only from a strategic long term perspective.

FII flows supplement and augment domestic savings and domestic investment without increasing the foreign debt of country. Added to this, FII inflows to the equity market increase stock prices, lower cost of equity capital and encourage the investment by Indian firms and lead to improvements in securities market design and corporate governance. The foreign institutional investment inflows have the potential of influencing the process of economic development of India through the positive impacts on macro-economic fundamentals of the country.

Therefore, the outlook is that the policy makers of India should provide the FIIs with more opportunities and reasons to invest in Indian markets by suggesting and implementing prudential norms. The FII manipulate the situation of boom in such a manner that they wait till the index rises up to a certain height and exit at an appropriate time.

This tendency increases the volatility further. But, volatility is too good for the market as it helps in keeping the economy cycle moving and it will again help the values of the stocks at a fair price for investments to again keep flowing and so will the FIIs too.

An analysis of the direction of causality to understand the possible devastating Impact of FII flows on the Indian economy is important from the viewpoint of Indian policy makers especially when such flows have recorded a sharp rise over the last decade.

But, as very few studies have been done so far in this regard, the present empirical study has been undertaken to throw some light on the cause and effect relationship between FII flows and Indian stock market returns. The CNX Nifty is a well diversified 50 stock index accounting for 13 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. CNX Nifty is owned and managed by India Index Services and Products Ltd.

Industry weights in the index reflect the industry weights in the market. The CNX Index represents about The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. FII AND CNX Table no. This indicates that the correlation among independent and depended variable is The coefficient of destermination is 2. Since p-value of F-static is 0.

research paper impact fii indian stock market

SUMMARY OUTPUT Regression Statistics Multiple R 0. This indicates that the correlation among independent and depended variable is positive. The coefficient of determination is 3. Foreign Institutional Investments and Liquidity of Stock Markets:. A Study of Foreign Institutional Inflows andndian Stock Market Volatility.

Understanding The Relation Between FII and Stock Market. Influence of FII Flows on Indian Stock Market. Foreign Institutional Investor project Impact of Foreign Institutional Investments on Indian Stock Market. Trend Analysis Of FII and Impact on SENSEX Yearly Analysis. Fii's in india ppt by N. Start clipping No thanks. You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later.

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