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ABSTRACT
Foreign 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 various
benchmarking of sensitivity indices (BSE Senex and S&P CNX NIFTY) in terms of highest
peaks and sudden falls. In this context present project examines the contribution of foreign
institutional 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 the
information obtained from the secondary sources like website of BSE Sensex. We have
attempted to explain the impact of foreign institutional investment on stock market and Indian
economy. Also attempts present the correlation and regression between FII and both BSE
Sensex 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&P
CNX NIFTY.
• To find the impact of net investments made by foreign institutional investors on BSE
Sensex.
• To find the trend of foreign institutional investment
Methodology
The impact of FII inflows on Indian stock market is to be determined. For this purpose
the secondary data is taken on monthly basis from the website. To know the impact of inflows
the Karl Pearson’s Co-efficient of correlation and Regression analysis have been used. It would
show whether the impact is positive or negative and how much the Indian stock market would
vary with respect to FII. For the purpose of calculation SPSS and MS-Excel software have
been utilised.
Major Findings
1. 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 correlation
between the net investment made by foreign institutional investors and the values of the BSE
Sensex is 39% and hence the inflow made by FII affects the BSE Sensex. The data collected is
from March 2007 to February 2012.
3. From the data interpretation and analysis we can come to the conclusion that the correlation
between the net investment made by foreign institutional investors and the values of the S&P
CNX NIFTY is 39.6% and hence the inflow made by FII affects the S&P CNX NIFTY in a
moderate way. The data collected is from March 2007 to February 2012.
Suggestions
1) Simplifying procedures and relaxing entry barriers for business activities and providing
investor friendly laws and tax system for foreign investors.
2) Allowing foreign investment in more areas. In different industries indices the FIIs
should be encouraged through different patterns like futures, options, etc.
3) Somewhere, a restriction related to the track record of Sub- Accounts is also to be
made on the investors who withdraw money out of the Indian stock market who have invested
with the help of participatory notes.

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Abstract

  • 1. ABSTRACT Foreign 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 various benchmarking of sensitivity indices (BSE Senex and S&P CNX NIFTY) in terms of highest peaks and sudden falls. In this context present project examines the contribution of foreign institutional 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 the information obtained from the secondary sources like website of BSE Sensex. We have attempted to explain the impact of foreign institutional investment on stock market and Indian economy. Also attempts present the correlation and regression between FII and both BSE Sensex 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&P CNX NIFTY. • To find the impact of net investments made by foreign institutional investors on BSE Sensex. • To find the trend of foreign institutional investment Methodology The impact of FII inflows on Indian stock market is to be determined. For this purpose the secondary data is taken on monthly basis from the website. To know the impact of inflows the Karl Pearson’s Co-efficient of correlation and Regression analysis have been used. It would show whether the impact is positive or negative and how much the Indian stock market would vary with respect to FII. For the purpose of calculation SPSS and MS-Excel software have been utilised.
  • 2. Major Findings 1. 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 correlation between the net investment made by foreign institutional investors and the values of the BSE Sensex is 39% and hence the inflow made by FII affects the BSE Sensex. The data collected is from March 2007 to February 2012. 3. From the data interpretation and analysis we can come to the conclusion that the correlation between the net investment made by foreign institutional investors and the values of the S&P CNX NIFTY is 39.6% and hence the inflow made by FII affects the S&P CNX NIFTY in a moderate way. The data collected is from March 2007 to February 2012. Suggestions 1) Simplifying procedures and relaxing entry barriers for business activities and providing investor friendly laws and tax system for foreign investors. 2) Allowing foreign investment in more areas. In different industries indices the FIIs should be encouraged through different patterns like futures, options, etc. 3) Somewhere, a restriction related to the track record of Sub- Accounts is also to be made on the investors who withdraw money out of the Indian stock market who have invested with the help of participatory notes.