⦁ 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. Major Research project on :
“Study of Trend of FII investment
and its impact on Sensex”
School of Economics, DAVV, Indore
SUBMITTED BY
Piyush Kumar Patidar
MBA (International Business)
Session : 2013-15

2.  Introduction
 Objectives of study
 Research Methodology
 Data Analysis and Interpretation
 Conclusion
 References
Contents

3.  Capital requirement & developing Nation
 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).
Introduction

4.  Any investor or investment fund that is from or
registered in a country outside of the one in which it
is currently investing.
 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
 Hot money
What is FIIs

5. ROUTE OF FIIS
INVESTMENT
On its own
behalf
On behalf of sub
account

6.  Form 2nd June 2014, 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.
New Foreign Portfolio Investor (FPI)
(Regulations 2014)

7.  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.
Objectives of Study

8.  The research has been carried out by collection of
secondary data with the use of primarily the internet
via website of SEBI and BSE;
 FIIs data From SEBI Website
 Sensex Data From BSE Website
Research mathodolgy

9.  Trend analysis:
 Graphical presentation
 table analysis,
 ratio of equity and debts is calculated
 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.
Tools Used for Research

10.  Correlation & Regression
 Calculated for Two different data set
1. By including value of 2008-2009
2. By excluding value of 2008-2009
Because, this yearly analysis and due to Global financial
crisis in 2008-2009. result is analyzed for better
accuracy.
Tools Used for Research

11. Data Analysis and Interpretation
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

12. Equity – Debt Ratio
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
Total 6,59,769 1,30,499 5.06:1

13. Absolute Change & Percentage Change in FIIs
Year Net Investment 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

14. Net Investment of FII
-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

15. Percentage Change in FIIs (Year
2003-15
-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

16. Trend Line for FIIs
-100000
-50000
0
50000
100000
150000
200000
FII
Linear (FII)

17.  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.
Trend Analysis

18.  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.
Continued….

19. Relation between FIIs and Sensex
Column 1 Column 2
Column1 1 0.205
Column2 0.205 1
Correlation : Including Values Of 2008-09
FII and Sensex has weak positive correlation.
Correlation coefficient: 0.205

20. By excluding values of Year 2008-09
Column 1 Column 2
Column1 1 0.436
Column2 0.436 1
Correlation
FII and Sensex are positively correlated.
Correlation coefficient: 0.436

21. Regression Analysis
Multiple R 0.205
R square 0.042
Intercept 15006.44
FII 0.020
P- Value 0.00079
Multiple R 0.43
R square 0.190
Intercept 10650.5
FII 0.055
P- Value 0.025
Including value of 2008-09 Including value of 2008-09

22.  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.
 FIIs has significant impact on Sensex.
 The correlation coefficient between FII and Sensex
for both analyses is positively correlated.
Conclusion & Findings

23.  When data of year 2008-09 included, Sensex is 20%
dependent on FIIs,
 When excluded, Sensex is 43% dependent which is
more than double increment in result.
Continue….

24.  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
 2) Mayur Shah (2013) “Flows of FIIs and Indian Stock Market’’
http://www.cpi.edu.in/
 3) Gordon, J. and Gupta, P. (2003). “Portfolio Flows into India: Do
Domestic Fundamentals Matter?” IMF Working Paper, Number
WP/03/02 .
 4) Chakrabarti, R. (2001). “FII Flows to India: Nature and Causes”,
Money and Finance, Vol. 2, No. 7.
 5) Mukherjee (2002) “Taking Stock of Foreign Institutional
Investors.” Economic and Political Weekly. June 11, 2005.
<www.rbi.ord.in>, www.sebi.gov.in
 6) Pal, P. (2004),” Foreign Institutional Investment in India”,
Research on Indian Stock Volatility. Vol. 12. Publisher: Emerald
Group Publishing Limited.
References

25.  7) Aggarwal, R., Klapper, L. & Wysocki, P. D. (2005). “Portfolio preferences of
foreign institutional investors”, Journal of Banking and Finance, Vol. 29, No. 12,
pp. 2919-2946.
 8) Batra, A (2004) “Foreign Institutional Investors: An Introduction”, Icfai,
University Press, pages-107-111.
 9) Rai, K. and N. Bhanumurthy (2004) “Role of return, risk and inflation as
determinants of foreign institutional investors in India”, Journal of Institutional
Investors. Vol. 17. Publisher: Emerald Group Publishing Limited.
 9) Bhupender Singh (2005), “Inter-Relation between FII, Inflation and Exchange
Rate”, Journal of Institutional Investors. Vol. 17. Publisher: Emerald Group
Publishing Limited
 10) Krishna Reddy Chittedi (2009). “Volatility of Indian Stock Market and FIIs”,
Journal: European Business Review. Vol. 15, pages 22-34
 11) Kumar (2002), “Pasricha, J.S. and Umesh C. Singh. “Foreign Institutional
Investors and Stock Market Volatility.” The Indian Journal of Commerce. Vol.54,
No.3, July-September, 2002.
 12) Narayan Sethi (2007),”Globalization, Capital Flows and Growth in India”,
Journal of ICFAI, Vol: 25. Publisher: MCB UP Ltd.
Continue….

26. Thank You