Abstract

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Abstract

  1. 1. ABSTRACTForeign Institutional Investors have gained a significant role in Indian stock markets.The dawn of 21st century has shown the real dynamism of stock market and the variousbenchmarking of sensitivity indices (BSE Senex and S&P CNX NIFTY) in terms of highestpeaks and sudden falls. In this context present project examines the contribution of foreigninstitutional investment in Indian Stock Market.Also attempts to understand the behavioural pattern of FII during the period March-2007 to February 2012 and examine the volatility of both indices due to FII. The data for theinformation obtained from the secondary sources like website of BSE Sensex. We haveattempted to explain the impact of foreign institutional investment on stock market and Indianeconomy. Also attempts present the correlation and regression between FII and both BSESensex and S&P CNX NIFTY.Objectives of the study• To study the scope and trading mechanism of Foreign Institutional investors in India.• To find the impact of net investments made by foreign institutional investors on S&PCNX NIFTY.• To find the impact of net investments made by foreign institutional investors on BSESensex.• To find the trend of foreign institutional investmentMethodologyThe impact of FII inflows on Indian stock market is to be determined. For this purposethe secondary data is taken on monthly basis from the website. To know the impact of inflowsthe Karl Pearson’s Co-efficient of correlation and Regression analysis have been used. It wouldshow whether the impact is positive or negative and how much the Indian stock market wouldvary with respect to FII. For the purpose of calculation SPSS and MS-Excel software havebeen utilised.
  2. 2. Major Findings1. There is a positive correlation between FII inflows and Indian Stock Market.2. From the data interpretation and analysis we can come to the conclusion that the correlationbetween the net investment made by foreign institutional investors and the values of the BSESensex is 39% and hence the inflow made by FII affects the BSE Sensex. The data collected isfrom March 2007 to February 2012.3. From the data interpretation and analysis we can come to the conclusion that the correlationbetween the net investment made by foreign institutional investors and the values of the S&PCNX NIFTY is 39.6% and hence the inflow made by FII affects the S&P CNX NIFTY in amoderate way. The data collected is from March 2007 to February 2012.Suggestions1) Simplifying procedures and relaxing entry barriers for business activities and providinginvestor friendly laws and tax system for foreign investors.2) Allowing foreign investment in more areas. In different industries indices the FIIsshould be encouraged through different patterns like futures, options, etc.3) Somewhere, a restriction related to the track record of Sub- Accounts is also to bemade on the investors who withdraw money out of the Indian stock market who have investedwith the help of participatory notes.

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