⦁ To study the trends and patterns of foreign capital flow into India in the form of FIIs. ⦁ To find relation between FIIs & Sensex. ⦁ To examine whether FIIs have any influence on SENSEX

1. 1
“Study of Trend of FII investment and its impact
on Sensex”
MAJOR RESEACH PROJECT FOR SESSION 2013-15
For Partial Fulfillment of the Requirement for the Degree of
MBA (International Business
SUBMITTED TO SUBMITTED BY
Dr. Vidya Telang Piyush KumarPatidar
MBA (International
Business)

2. 2
ACKNOWLEDGEMENT
I am using this opportunity to express my deep gratitude to everyone who supported
me throughout my Major Research Project on the Topic “Study of Trend of FII
investment and its impact on Sensex”.
I am thankful for to all for aspiring guidance, valuable thoughts and friendly advice
during the project work. I am sincerely grateful to them for sharing their truthful and
illuminating views on a number of issues related to the project.
I express my warm thanks to my project Mentor Dr. Vidya Telang for their valuable
support and special guidance during the project work.
I would also like to thank my Friends and all the people who provided me with the
facilities being required and conductive conditions formy MBA project.
Piyush KumarPatidar

3. 3
DECLARATION
I Piyush Kumar Patidar studying in MBA (IB) 4th semester declares that i have done
a project on “Study of Trend of FII investment and its impact on Sensex”. As
required by the university rules, I state that the work presented in this thesis is original
in nature and to the best my knowledge, has not been submitted so far to any other
university. Whenever references have been made to the work of others, it is clearly
indicated in the sources of informationin references.
PiyushKumar Patidar

4. 4
CERTIFICATE
This is to certify that the Major Research Project on topic “Study of
Trend of FII investment and its impact on Sensex” which is being submitted by Piyush
Kumar Patidar of MBA [International Business] branch in the partial fulfilment of
this course curriculum has satisfactorily completed under my supervision and guidance.
This is original workdone by him. I approve this project forfurther evaluation.
Guidedby- Student’sname-
Dr. Vidya Telang Piyush Kumar Patidar

5. 5
Contents
Chapter 1 - Introduction …page no. 7
Chapter 2 - Review of Literature …page no. 12
Chapter 3 - ResearchMethodology …page no. 17
Chapter 4 - Data Analysis and Interpretation …page no. 22
Chapter 5 – Conclusion …page no. 32
References …page no. 33

6. 6
Chapter 1

7. 7
Introduction
Capital is considered to be very important growth in any economy. In case of
developing country like India Domestic capital is not sufficient to fulfill the
requirement of economy. In that case foreign capital plays a very important role.
Foreign Capital comes in two forms Foreign Direct Investment (FDI) and Foreign
Institutional Investment (FII). FDI is considered as a more stable form of foreign
capital as compared to FII. But, FII inflows and outflows directly create impact on
stock market. Hence FIIs have emerged as movers and shakers of Indian Stock
Market. This Research Project examines the trend and pattern of FII flow in India
and also examines the relationship between FII and Sensex.
Institutional Investor is any 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. The
growing Indian market had attracted the foreign investors, which are called Foreign
Institutional Investors (FII) to Indian equity market, and in this paper, we are trying a
simple attempt to explain the impact and extent of foreign institutional investors in
Indian stock market. Role of FII has increased and changed the face of Indian Stock
Market. It has brought both qualitative and quantitative change. It had also increased
the breadth and depth of market. Although the Foreign institutional investors (FIIs),
whose investments are often called 'hot money' because they can be pulled out at
any time, have been blamed for large and concerted withdrawals of capital from the
country at the time of recent financial crisis, they have emerged as important players
in the Indian capital market. With over 20 million shareholders, India has the third
largest investor base in the world after the USA and Japan.
Over 9,000 companies are listed on the stock exchanges, which are serviced by
approximately 7,500 stockbrokers. The Indian capital market is significant in terms of
the degree of development, volume of trading and its tremendous growth potential.
The Foreign Institutional Investors (FIIs) have emerged as remarkable players in the
Indian stock market and their growing contribution adds as an important feature of

8. 8
the development of stock markets in India. As a result, the Indian Stock Markets
have reached new heights and became more volatile making the researches work in
this dimension of establishing the link between FIIs and Stock Market volatility.
Hence, it’s an interesting topic to ascertain the role of FIIs in Indian Stock Market.
After the launch of the reforms, foreign institutional investors (FIIs) from September
14, 1992, with suitable restrictions, were permitted 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. A positive contribution of
the FIIs has been their role in improving the stock market infrastructure and the SEBI
assured its contribution towards its development.
Hence, in this age of transnational capitalism, a significant amount of capital is
flowing from developed world to emerging economies. Positive fundamentals
combined with fast growing markets have made India an attractive destination for
foreign institutional investors (FIIs). Although the Foreign institutional investors (FIIs),
whose investments are often called 'hot money' because they can be pulled out at
anytime, have been blamed for large and concerted withdrawals of capital from the
country at the time of recent financial crisis, they have emerged as important players
in the Indian capital market.
Form 2nd June 2014 the new foreign portfolio investor (FPI) regulations, which
replace the two-decade old foreign institutional investors (FII) regime, in the Indian
market has got operational now. From now on, new overseas investors wanting to
enter the Indian market will be registered under the FPI Regulations.
ROUTE OF FIIS INVESTMENT:
FIIs have two route of making investment in Indian capital market:
1. On its own behalf.
2. On behalf of sub account (Sub-account means any person residents outside India,
on whose behalf investments are proposed to be made in India by a FII investor and

9. 9
who is registered as a sub-account under SEBI. For each sub-account a separate
registration is granted. The sub-account should fall into the categories, namely: a
Broad Based Fund or Portfolio incorporated or established outside India; a
Proprietary Fund; a Foreign Corporate (A foreign corporate means a body corporate
incorporated outside India which has listed securities on any stock exchange
outside India with an asset base of not less than $ 2 billion US dollars and had an
average net profit of not less than fifty million US dollars during the three financial
years preceding the date of the application.) or an Foreign individual; (A Foreign
Individual has a net worth of not less than $ 50 million, holds the passport of a
foreign country for 5 years, hold a certificate of good standing from a bank and
client of the concern FII for last 3 years. The NRIs shall not be eligible for opening a
subaccount) or a University Fund, Endowment, Foundation, Charitable Trust or
Charitable society (Securities and Exchange Board of India (Foreign Institutional
Investors) Regulations, 1995).
INVESTMENTSPATTERN OF FIIS IN INDIAN STOCK MARKET:
(i) A FII could invest in the primary and secondary markets including shares,
debentures and warrants of the companies unlisted, listed or to be listed on a
recognized stock exchange in India. These could also invest in units of mutual
fund whether listed or unlisted; dated government securities; listed
derivatives; commercial paper and security receipts.
(ii) Total investments in equity, convertible debentures (CDs) and tradable
warrants on its own account or on behalf of sub-account shall not be less than
70% of the aggregate of total investment by the FIIs. A foreign corporate or
individual shall not be eligible to invest through the 100% debt route.
(iii) FIIs can’t invest in security receipts on behalf of its sub-account. FIIs could
invest or transact in the Indian securities market only on the basis of taking
and giving delivery of securities purchased or sold. They could enter into short
selling transaction as specified by SEBI. RBI shall grant permission to make
transactions in government securities like commercial paper (CP) and T-Bill.

10. 10
(iv) FII investment in equity shares of a company on behalf of its sub-accounts
shall not exceed 10% of the total issued capital provided further that foreign
corporate or individuals, each of such sub-account shall not more than 5% of
the issued capital.
(v) FII could lend or borrow securities on behalf of sub account. No FII could
issue or deal in off-shore derivative instruments, directly or indirectly, unless
such off-shore derivative instruments are issued only to persons who are
regulated by an appropriate foreign regulatory authority and know your
customer (KYC) norms have been fulfilled. No sub-account shall issue off-
shore derivative instruments. Off-shore derivative instruments are issued by
FIIs against securities held by it that are listed or proposed to be listed on any
recognized stock exchange in India.
(vi) FIIs shall disclose information regarding the terms of and parties to off-shore
derivative instruments such as Participatory Notes (PNs), Equity Linked Notes
or any other such instruments enter into by it or its subaccount units or
affiliates relating to any securities listed or proposed to be listed in Indian
Stock Exchange.(Securities and Exchange Board of India (Foreign
Institutional Investors) Regulations, 1995).

11. 11
Chapter 2

12. 12
Review of Literature
Kulwantraj N. Bindu (2004), in his research paper titled ‘A study on the
determinants of foreign Institutional Investments in India and the role of risk,
inflation and return’ had conducted an intensive study to find out the
determinants responsible for the flow of FIIs and their degree of impact. With
the help of monthly data they found out that FII inflow depends on stock
market returns, inflation rates (both domestic and foreign), and ex-ante risk. In
terms of magnitude, the impact of stock market returns and the ex-ante risk
turned out to be the major determinants of FII inflow. The study has not found
any causative link running from FII inflow to stock returns.
Raj Chaitanya (2003),
In his research work titled ‘Foreign Institutional Investments’ discussed in
length about the FIIs and their impact on the Indian economy. Analyzing daily
flow data, he concludes that the stock market performance has been the sole
driver of FII flows, though monthly data in the pre-Asian crisis period suggests
some reverse causality.
Krishna Reddy Chittedi (2009) In his research work titled ‘ Volatility of Indian
Stock Market and FIIs’ analyzed the performance of SENSEX v/s. FIIs and
some of the most talked about movements of the SENSEX, starting with the
secondary market summary of each year. Foreign investments in BSE reveal
that the liquidity as well as volatility was highly influenced by the FII flows. FIIs
are significant factor in determining the liquidity and volatility in the stock
prices. With thorough analysis regarding the stock market in last 2 years, it
was concluded that stock market touched its peak at 21000 but then crashed
badly.
Rao (1999), in their study of foreign institutional investments and Indian stock
market found that the net FII investments influence the stock prices in India.

13. 13
Chakrabarti and Vimal (2001), Concluded in their study that in the pre-Asian
crisis period any change in FII was found to have a positive impact on the
equity returns, whereas in the post- Asian crisis the reverse relationship was
noticed. FII’s were a major portion of investments and their roles in
determining the movement of share price and indices is considerably high.
The movement of indices in India depends only on the trade done in limited
number of stocks. Thus, when the FII’s frequently buy and sell stocks, it leads
to volatility of the market.
Gordon and Gupta (2002), on the portfolio flows in India and the influence of
domestic fundamental factors, it was found that there exists a strong impact of
the domestic fundamentals on the investment flows into India. They used the
data from September 1992 till October 2001 and applied regression model
and unit root test. It was concluded that the portfolio flows to India are small,
compared to other emerging markets and also less volatile. The combination
of domestic, regional and global variables are important in the determination
of the portfolio flows into India.
Kumar (2002), on the role of institutional investors (including the FIIs) in
Indian equity market, concluded that FIIs and Indian mutual funds combined
together are the most powerful and influential force in driving the Indian
market.
Mukherjee (2002), examined the various probable determinants of FII and
concluded
(1) Foreign investment flows to the Indian markets tend to be caused by return
in the domestic equity market;
(2) Returns in the Indian equity market is an important factor that has an
impact on FII flows;

14. 14
(3) whereas FII sale and FII net inflow are significantly affected by the
performance of the Indian equity market, FII purchase show no such affect to
this market performance;
(4) FII investors do not probably use Indian equity market for the purpose of
diversification of their investment;
(5) Returns from the exchange rate variation and the fundamentals of the
economy may have an impact on FII decisions, but such influences do not
Prove to be strong enough.
Batra, A (2004), In his research work has analyzed the trading behaviour of
FIIs and their impact of trading biases upon stock market volatility. It was
found that there is a strong evidence for the fact that FIIs on daily basis have
been positive investors and trend chasers at the aggregate level. But there
seem to exist no evidence of positive feedback trading on monthly basis. The
research work also indicates that the foreign investors have a tendency to
herd together in their trading activity in India. The trading behavior/biases of
the FIIs do not appear to have a destabilizing impact on the equity market.
Dhwani Mehta (2009), in her research work titled ‘A Study: FII Flows in India’
the Indian stock markets have been experiencing humungous amount of FII
flows. This has affected small investors thinking that markets are rigged. For
the good news to Indian investors it has been established that out of all the
factors, it is basically the performance of Indian stock markets vis-à-vis other
emerging and developed markets that probably may cause returns and not
the other way round.
Mohan, T.T. (2005), concludes that the crossover funds in the emerging
markets form only a very small component of global portfolios and hence they
are somewhat a bit less vulnerable to fluctuations to stock returns arising from
changes in fundamental and economic conditions in emerging markets.

15. 15
Rai, K. and N. Bhanumurthy (2004), Examined the role of return, risk and
inflation as determinants of foreign institutional investors in the context of
India. They found that FII inflow depends on stock market returns, inflation
rates (both domestic and foreign) and ex-ante risk. In terms of magnitude, the
impact of market returns and the ex-ante risk turned out to be the major
determinants of FII inflow. They have also found that there is any causative
link running from FII inflow to stock returns. And in the last, they have
suggested that the stabilizing the stock market volatility and minimizing the ex-
ante risk would help to attract more FII, an inflow of which have a positive
impact on the real economy.
Narayan Sethi (2007), Globalization, Capital Flows and Growth in India:
Capital flow is of importance, when the magnitude of those flows is steady and
stable. The international capital flow like direct and portfolio flows has great
contribution to impact the economic behavior of the countries in a positive
way.
Bhupender Singh (2005), in his research work titled ‘Inter-Relation between
FII, Inflation and Exchange Rate’ discussed about as to how the financial
sector of an economy plays a vital role in attracting the Foreign Institutional
Investment inflows. The study tries to examine the extent of effect of
significant macroeconomic variables; inflation and exchange rate on the flows
of Foreign Institutional Investment in India. He has tried to analyze the inter-
relation between Foreign Institutional Investment, Exchange Rate and
Inflation. Given the large volume of these flows and their impact on domestic
financial markets; understanding the major determinants of these flows
becomes imperative as the economy has now moved towards full capital
account convertibility.
Pal, P. (2004), found that FIIs are the major players in the Indian stock market
and their impact on the domestic market is increasing. Trading activities of

16. 16
FIIs and the domestic stock market turnover indicates that FII’s are becoming
more important at the margin as an increasingly higher share of stock market
turnover is accounted for by FII trading in India.

17. 17
Chapter 3

18. 18
Research Methodology
Objectives of Study
 To study the trends and patterns of foreign capital flow into India in the form of
FIIs.
 To find relation between FIIs & Sensex.
 To examine whether FIIs have any influence on SENSEX.

19. 19
Research design
The research has been carried out by collection of secondary data with the use of
primarily the internet via website of SEBI and BSE; the data of FIIs Net
Investment have collected from the report of SEBI whereas the Sensex data have
collected from the archives of the BSE. Sensex consist of 30 component stocks
representing large, well-established and financially sound blue chip companies
across the key sectors .No primary data has been used here like face to face
interviews or telephonic interviews, questionnaires etc.
RESEARCH TYPE
 Analytical research - In analytical research, the researcher has to use facts
or information already available, and analyze these to make a critical
evaluation of the material. The analytical research usually concerns itself with
cause-effect relationships. While analytical research attempts to
establish why it is that way or how it came to be.
 Exploratory research - Exploratory research helps determine the best
research design, data collection method and selection of subject. Research is
quite informal, relying on secondary research. Results of exploratory research
provide significant insight in given situation.
 Descriptive research - Descriptive research are a means of discovering new
meaning, describing what exists, determining the frequency with which
something occurs, and categorizing information. Also deals with everything
that can be counted and studied, which has an impact of the lives of the
people it deals with. It is description of the state of affairs as it exists at
present. The main characteristic of this method is that the researcher has no
control over the variables; we can only report what has happened or what is
happening.

20. 20
Research Approach
 Data type- Secondary Data
Secondary data are those that have already been collected by others. These
are usually available in journals, periodicals, dailies, research, publications,
official records etc.
 Data collection - Secondary Data is collected through published sources like
Government publication, reports on projects, research papers of educational
Institutions, organizations and various government official websites. In this
research data is collected from official website of BSE and SEBI. Last 10 year
data is being used for research.
Tools Used for Research
Trend analysis: is done with Graphical presentation and table analysis, ratio of
equity and debts is calculated also absolute change & absolute percentage
change is being calculated for the better understanding and analysis of trend. All
the graphical n tabulation is done with the help of MS-Excel.
Correlation analysis:
Relationship between FII and Sensex is calculated with the help of MS- Excel for
two different data type in which first data table includes the value of year 2008-09
and in second analysis value of 2008-09 is excluded for the accuracy of result.
The correlation coefficient (a value between -1 and +1) tells you how strongly two
variables are related to each other.
 A correlation coefficient of +1 indicates a perfect positive correlation. As
variable X increases, variable Y increases.
 A correlation coefficient of -1 indicates a perfect negative correlation. As
variable X increases, variable Z decreases.

21. 21
 A correlation coefficient near 0 indicates no correlation.
Regression Analysis
Regression analysis is a statistical tool for the investigation of relationships between
variables. Usually, the investigator seeks to ascertain the causal effect of one
variable upon another—the effect of a price increase upon demand, for example, or
the effect of changes in the money supply upon the inflation rate. To explore such
issues, the investigator assembles data on the underlying variables of interest and
employs regression to estimate the quantitative effect of the causal variables upon
the variable that they influence. The investigator also typically assesses the
“statistical significance” of the estimated relationships, that is, the degree of
confidence that the true relationship is close to the estimated relationship.
In this research project impact of FII is on the Sensex is done on the yearly data of
last 10 years. In which FII is independent variable and Sensex is dependent variable.
Regression is calculated with the help of MS-Excel.

22. 22
Chapter - 4

23. 23
Data Analysis and Interpretation
Table 1 -The following data of investment of FII is for theperiod of 12 years in
formof equity and debts.
FPI Investments - Financial Year
INR crores
Financial Year Equity Debt Total
2004-05 44,123 1,759 45,881
2005-06 48,801 -7,334 41,467
2006-07 25,236 5,605 30,840
2007-08 53,404 12,775 66,179
2008-09 -47,706 1,895 -45,811
2009-10 1,10,221 32,438 1,42,658
2010-11 1,10,121 36,317 1,46,438
2011-12 43,738 49,988 93,726
2012-13 1,40,033 28,334 1,68,367
2013-14 79,709 -28,060 51,649
2014-15 ** 9,602 -9,185 418
Total 6,17,282 1,24,532 7,41,812
Year Equity Debt Ratio
2003-04 39,960 5,805 6.88:1
2004-05 44,123 1,759 25.08:1
2005-06 48,801 -7,334 -6.65:1
2006-07 25,236 5,605 4.5:1
2007-08 53,404 12,775 4.18:1
2008-09 -47,706 1,895 25.17:1
2009-10 1,10,221 32,438 3.4:1
2010-11 1,10,121 36,317 3.03:1
2011-12 43,738 49,988 0.87:1
2012-13 1,40,033 28,334 4.94:1
2013-14 79,709 -28,060 -2.84:1
2014-15 9,602 -9,185 -1.05:1
Table 2- Showing Equity – Debt Ratio.

24. 24
The following table represent absolute change and percentage change in Net
Investment in FIIs. Between year 2003-15.
Table 3 -Absolute Change & Percentage Change in FIIs:
Total 6,59,769 1,30,499 5.06:1
Year NetInvestment Absolute Change % Change
2003-04 45,765 43,076 -
2004-05 45,881 116 0.25
2005-06 41,467 -4,414 -9.62
2006-07 30,840 -10,627 -25.62
2007-08 66,179 35,339 114.58
2008-09 -45,811 -111,990 -169.22
2009-10 142,658 188,469 -411.405
2010-11 146,438 3,780 2.64
2011-12 93,726 -52,712 -35.99
2012-13 168,367 74,641 79.63
2013-14 51,649 -116,718 -69.32
2014-15 418 -51,231 -99.19
Total 787,577

25. 25
Graph 1 -Net Investment of FII
Graph 2 - Trend Line for FIIs
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
FPI Investments - Financial
Year INR crores Total
FPI Investments - Financial
Year INR crores Debt
FPI Investments - Financial
Year INR crores Equity
-100000
-50000
0
50000
100000
150000
200000
Year
FII
Linear (FII)

26. 26
Graph 3 - Percentage Change in FIIs (Year 2003-15)
The above table shows the percentage change in FIIs between years 2003-15. It can
be clearly concluded that there is very high rate of fluctuation in FII between this
periods. Highest negative percentage change was observed in financial year 2009-
10 i.e. 411.405%. After the global crises of 2008-09 foreign investors shown to invest
money in Indian economy.
-500
-400
-300
-200
-100
0
100
200
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
Total
% Change
% Change

27. 27
Trend Analysis
Table 1 reveals that investors are investing more in equity as compare to debts. So
following point can be concluded by analyzing above data,
 2005-06, investment in Equity were 48801 crores which is more compare to
previous year but net invest which was 41467 crores which is less than
previous year due to withdraw of 7334 crores from debts.
 2006-07, Net Investment was also low compare to previous year i.e. 30840 cr.
 2007-08, more than 50% of growth is observed in net investment i.e. 66179 cr.
 But 2008-09, net inflow of foreign capital in form of FIIs was negative, previous
researcher joined this Incidence with Global Economic Crises in this period,
recession in UK and bursting of Real State Bubble in USA.
 2009-10, starting year of UPA -2, highest ever net investment is observed in
FIIs i.e. 142658 cr.
 2010-11, highest investment in equities observed and which is considered one
of the great years for investors with partial growth in net investment i. e.
146438.
 2011-12, highest investment in debts 49988 cr. but decrease in net investment
of 136836 cr.
 2012-13, Investment in equity touched new millstone with 140033 cr. As well as
in net investment i.e. 168367 cr.
 2013-14, net investment was decreased approx. to 1/3 of previous year’s i.e.
51649 cr.
 2014-15, new hope is arising as NDA first time come in power with full majority.
Trying to provide good environment to foreign investors which is good sign for
shareholders as well as Indian Economy.
 Trend of FII investment is positive.

28. 28
Relation between FIIs and Sensex
Table 4
Year FII Sensex
2003-04 45,765 6602.69
2004-05 45,881 9397.93
2005-06 41,467 13786.91
2006-07 30,840 20286.99
2007-08 66,179 9647.31
2008-09 -45,811 17464.81
2009-10 142,658 20509.09
2010-11 146,438 15454.92
2011-12 93,726 19426.71
2012-13 168,367 21170.68
2013-14 51,649 27499.42
Correlation
Column 1 Column 2
Column1 1 0.205
Column2 0.205 1
This table showsthat FII and Sensex has weak positive correlation.
Correlation coefficient: 0.205

29. 29
By excluding values of Year 2008-09
Table 5
Year FII Sensex
2003-04 45,765 5590.6
2004-05 45,881 6492.82
2005-06 41,467 11279.96
2006-07 30,840 13072.1
2007-08 66,179 15644.44
2009-10 142,658 17527.77
2010-11 146,438 19445.22
2011-12 93,726 17404.2
2012-13 168,367 18835.77
2013-14 51,649 27499.42
Correlation
Column 1 Column 2
Column1 1 0.436
Column2 0.436 1
This table shows that FII and Sensexare positively correlated.
Correlation coefficient:0.436

30. 30
Correlation Analysis:
Correlations have been applied on the above data set. Table 3 shows
investment and Sensex point of 2008-2009. Table 4 has excluded that value
due to Global economic crisis between this period.
Therefore the correlation from table 3 is less i.e. 0.205 and that of table 4 is
0.436. And these both values show positive correlation between FII and
Sensex.
Regression Analysis -1
From table: 3 including value of year 2008-09
Multiple R 0.205
R square 0.042
Intercept 15006.44
FII 0.020
P- Value 0.00079
Regression Analysis -2
From table: 4 excluding value of year 2008-09
Multiple R 0.43
R square 0.190
Intercept 10650.5
FII 0.055
P- Value 0.025

31. 31
Interpretation:
There is a positive relation between FII and Sensex. Including the data of 2008-
09 we can say that if one unit of FII increase 0.02 change in Sensex.
There is comparatively more positively relation between FII and Sensex.
Excluding the data of 2008-09 we can say that if one unit of FII increase 0.055
change in the Sensex.
 From table 3 we can conclude that Sensex is 20% dependent on FIIs.
 From table 4 we can conclude that Sensex is 43% dependent on FIIs.

32. 32
Chapter- 5

33. 33
Conclusion:
From the above study, it can be concluded that FIIs has significant impact on
Sensex. The correlation coefficient between FII and Sensex for both analyses is
positively correlated. From table-4 correlation coefficient is 0.205 and from
table-5 coefficients is 0.436 in which values FIIs and Sensex is excluded.
Trends of FII is positive as per the trend analysis i.e. Foreign investors are
looking forward to invest in India. NDA come up in the power with full majority in
General Election (Loksabha Election) – 2014. Providing stable govt. which is
good for the investors as well as economy.
When regression analysis is done on the same data sets. Than we can
conclude that from table 4, Sensex is 20% dependent on FIIs and from table 5,
Sensex is 43% dependent which is more than double increment in result.
No doubt inflow of foreign capital brings foreign currency ($) into the country
which contributes towards increase in wealth of shareholder but large portion of
capital in stock market comes through domestic route. Thus it is important for
the country to encourage the investment with in the country along with the
foreign investment because FII look for income if the economy grows they
entered into the stock market of the concerned economy but exit from the
market in the same speed as they entered. Also global and domestic activities
are responsible for change in the FII investment pattern.

34. 34
References
1) A. Kulwantraj N. Bindu (2004).” The determinants of foreign Institutional
Investments in India and the role of risk, inflation and return”, Indian Economic
Review, Vol. 32, Issue 2, pages 217-229
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