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FII͛s Influence On Sensex Over The Period 2000-2010c
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³ FII¶s influence on the Sensex over the period 2000-2010 ´- is a study of the
influence of
c whose activities play a vital
role in the ups and downs of the share market. The study is conducted on the Indian
stock exchange market ( BSE SENSEX) .
There are conflicting theories on the issue of whether FII flows affect or are affected
by domestic stock market returns. So, the present empirical study has been undertaken
to throw some light on the direction of causality between FII flows and Indian stock
market returns using data on both the variables from over the period @ c@ i .c
International portfolio flows, as are commonly known as cc
c c flows, refer to capital flows made by individual and institutional
investors across national borders with a view to creating an internationally diversified
portfolio. Unlike Foreign Direct Investment (FDI) flows which refer to that category
of international investment aimed at obtaining a lasting interest by a resident entity in
one economy in an enterprise resident in another economy by way of exercising
significant control over its management, FII flows are not directed at acquiring
management control over foreign companies. FII flows were almost non-existent until
1980s.
With more and more emerging market economiesc , deregulating their
financial markets by eliminating foreign exchange controls, reducing taxes imposed
on foreign investors, relaxing the restrictions on the purchase / sale of securities by
foreign investors in domestic markets etc. they are increasing in number.
Foreign Institutional Investment (FII) flows, i.e., capital flows across national borders,
to emerging market economies (EMEs) have risen sharply over the past one and half
decade due to globalization and India is no exception in this regard. However, there is
a lot of apprehension regarding the volatile nature of such flows thereby raising
questions about the need to encourage FII flows in a narrow and shallow stock market
like that of India.
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§c To know the Indian stock exchange market- BSE, NSE
§c To study the performance of Sensex over the period 2000-10
§c To know about FII
§c To study the effect of FII¶s investment in BSE sensex

§c To study the relationship between FII activity and sensex
§c To find the trend in FII¶s investment
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§c To get in touch with the industrial and organizational environment.
§c To familiarize with the trends in the stock market(BSE) over the years
§c To familiarize with the importance of FII in Indian stock market
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The methodology of the study is through collecting the primary and secondary
data.
Primary data refers to the data collected by the investigator directly through
primary sources. It includes;
§c Direct observation.
§c Interview (personal).
Secondary data refers to the data collected from;
§c Books
§c ournals
§c Websites
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§c Jompany manuals etc.
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§c Time
§c xnalysis is conducted only on the basis of some factors therefore cent percent
accuracy is not possible.
§c Ñack of reliability of Secondary data
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Jhapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of

the study, Methodology, Ñimitations and Jhapterisation.
Jhapter 2 : Industry Profile - ³Stock Market´.
Jhapter 3 : Jompany Profile - ³HEDGE EQUITIES´.
Jhapter 4 : Theoretical Framework ±Indian stock market & Foreign Institutional

investors
Jhapter 5 : xnalysis and Interpretation
oc xnalysis of the performance of BSE over the years
oc xnalysis of the FII inflow to Indian stock exchange
oc xnalysis of the Sensex gain due to FII¶s investment
oc xnalysis of Sensex return due to the increase in number of FII

registration
oc xnalysis of the correlation between sensex returns and FII µsnet

investment
oc xnalysis of the trend in FII µs investment
Jhapter 6 : Findings, Jonclusion and Suggestions.
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The Indian retail brokerage industry consists of companies that primarily act
as agents for the buying and selling of securities (e.g. stocks, shares, and similar
financial instruments) on a commission or transaction fee basis. It has two main
interdependent segments: Primary market and the Secondary market. Now this market
is extended to fields like currency, commodity, mutual fund, insurance etc...
The Indian equity brokerage industry thrived on the back of equity markets'
sustained bull run during 2003-07. xlthough high competitive pressure meant
continuous compression of brokerage commissions and low electronic penetration
kept operating costs high, industry revenue was growing. Furthermore, the industry
attracted domestic and foreign investment interest at high valuations of upto 45x P/E
multiples. During this time, many of the key players started expanding their portfolio
of services to include wealth management and advisory services, sale of insurance and
mutual fund products, consumer financing and so on.
However, post-2008, the economic downturn - muted trading turnover,
relentless competitive pressure and decreasing margins, continued high operating
costs and high margining requirements - has put the industry under pressure.
Profitability is muted and the major players are under pressure to build scale.
Expansion of scale and investments into technological systems has the potential to
lead the top brokerage firms into paths of higher growth, but the current economic
climate is clearly against heavy investments.
The basic function of a brokerage firm is to execute buy and sell orders for
clients. Traditionally these firms have offered the investigation of the quality and the
possibilities of investing in a variety of investment products. It is still accustomed for
brokerage firms to offer information about possible investments free of charge. This
activity of bringing free of charge stock investment reports is one of the main tools
that are utilized by brokerage houses to compete against other firms and to investors it
continues to be an important service
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Stock brokerage firms have been an established feature in the financial industry
for nearly one thousand years. Dealing in debt securities, brokers employ a variety of
systems to aid investors with the purchase and sales of stocks and bonds in a variety
of markets. The firms have changed over the years, growing to massive organizations
that can affect the entire financial sector positively or negatively with their
performance. Jhanging with the times, the early twenty-first century saw a rise of
online trading that enabled the average investor to take part in the stock market for the
first time.
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During the 11th century, the French began regulating and trading agricultural
debts on behalf of the banking community, creating the first brokerage system. In the
1300s, houses began to be set up in major cities like Flanders and xmsterdam in
which commodity traders would hold meetings. Soon, Venetian brokers began to
trade in government securities, expanding the importance of the firms.
In 1602, the Dutch East India Jompany became the first publicly traded company in
which shareholders could own a portion of the business. The stocks improved the size
of companies and became the standard bearer for the modern financial system.
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The earliest brokerage firms were established in Ñondon coffee houses,

enabling individuals to purchase stocks from a variety of organizations. They formally
founded the Ñondon Stock Exchange in 1801 and created regulations and
memberships. The system was copied by brokerage firms across the world, most
notably on Jhestnut Street in Philadelphia. Soon, the US exchange was moved to
New York Jity and various firms like Morgan Stanley and Merrill Ñynch were
created to assist in the brokering of stocks and securities. The firms limited
themselves to researching and trading stocks for investment groups and individuals.
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During the 1900s, stock brokerage firms began to move in a direction of market
makers. They adopted the policy of quoting both the buying and selling price of a
security. This allows a firm to make a profit from establishing the immediate sale and
purchase price to an investor. The conflict with brokerage firms setting prices creates
the concern that insider trading can result from the sharing of information. Regulators
have enforced a system called Jhinese Walls to prevent communication between
different departments within the brokerage company. This has resulted in increased
profits and greater interconnection within the financial industry.
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The creation of high valued brokerage firms like Goldman Sachs and Bear
Sterns created a system of consolidation. Working with hundreds of billions of
dollars, the larger firms began to merge and take over smaller firms in the last half of
the 20th century. Firms like Smith Barney were acquired by Jitigroup and other
investment banks, creating massive financial institutions that valued, held, sold,
insured and invested in securities. This conglomeration of the financial sector created
an environment of volatility that caused a chain reaction when other firms like Bear
Sterns and Ñehman Brothers filed for bankruptcy. Trillions of dollars of assets were
tied together in different companies and resulted in a large economic collapse in late
2008.
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x large share of the brokerage firms have moved to an online format. Smaller
brokers such as E*Trade, TD xmeritrade and Jharles Schwab have taken control of
most individual investors accounts. The added convenience and personal attention
paid to the small investor has resulted in a large influx of activity. In addition, the fact
that the online resources offer up-to-the-minute pricing and immediate trades makes
their format appealing to the modern user. Discounted commissions have lessened the
price of trades, giving access to a wider swath of people and adding liquidity to the
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market. The role of the stock brokerage firm is ever-changing and proves to be a boon
for the future of the financial industry.
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Full service brokerage firms continue to offer informative stock reports and a
level of service much higher than other brokerage houses. Discount brokerage houses
only dedicate themselves to execute orders for clients. Full service brokers are sellers
looking for purchasing and selling for clients and offering more customer service than
is available from discount brokers. It is many times possible that a client will not even
know who is taking care of the buy or sell order that they placed.
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The Indian retail brokerage market is showing phenomenal growth. The total
trading volume of brokerage companies has increased from US$1239.1 billion in
2004 to US$1492.1 billion in 2005, and is expected to reach US$6535.7 billion by
2015. Some of the main characteristics of the brokerage industry include growth in e-
broking; growing derivatives market, decline in brokerage fees etc.
Today, as per NSDÑ statistics, we have only 2.4 million investors with demat
accounts in the country. Jonsidering various investor combinations that are holding
accounts, we can presume the country has roughly 5-7.5 lakh active investors now.
This figure is unbelievably small compared to the potential number of investors,
which is anything between 200 million and 250 million. When we take into
consideration the way transaction risk and cost in the Indian capital market is coming
down, there will be a massive surge in the number of investors and also in volumes.
The only way to manage this kind of potential growth is to adopt state-of-the-art
trading techniques.
The growth of Internet-based trading as a mass trading technique in the
country is unstoppable, going by the indicators available and the signals for the future.
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When it ultimately gathers momentum, the biggest beneficiary will be the investor,
who will be able to trade with greater speed and transparency, and at lower costs...
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oc IJIJI Securities Ñtd. (www.icicidirect.com)
oc otak Securities Ñtd. (www.kotaksecurities.com)
oc Indiabulls Financial Services Ñimited (www.indiabulls.com)
oc IÑ&FS investmart Ñimited (www.investsmartindia.com)
oc SSI Ñtd. (www.sharekhan.com)
oc Motilal Oswal Securities (www.motilaloswal.com)
oc Fortis Securities (Religare) (www.fortissecurities.com)
oc arvy securities (www.karvy.com)
oc Geojit BNP paribas (www.geojitbnpparibas.com)
oc HDFJ Securities (www.hdfcsec.com)
oc Hedge equities (www.hedgeequities.com)
oc rg securities
oc India infoline (www.indiainfoline.com)
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Team Hedge is a balanced mix of more than 15 years experience cutting

across various industries with a strong background in the financial markets. The
board comprises of six power houses in their respective fields - FedEx Securities,
Baby Marine Exports, Thakker Developers, Smart financial, SM Hegde (JFO,
Videocon Industries) and Padmashree Mohan Ñal
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Managed by a team of ex-bankers, FedEx is a SEBI registered category 1

merchant banker. The company concentrates on non fund based activities like
structuring, tie up of project financing, financial restructuring, investment banking,
corporate and advisory services. The core management team consists of bankers
with rich experience of decades and exposure to volatile situations in commercial
and investment banking. With offices at Nariman Point and Vile Parle East,
Mumbai, state of the art infrastructure and qualified manpower to conduct the
business, FedEx Securities envisages a phenomenal growth in this sector for its
clients.
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Baby Marine Group, started its operations in 1977 from ozhikode and
through innovation and hard work has grown into three units and related industries
spanning both the west and east coast of Indian. Baby Marine Exports, B.M
products, and Baby Marine (Eastern) Exports are efficiently aided by pre processing
units, ice factories, and a fleet of insulated and refrigerated trucks for sea food
transportation. Due to constant upgrading of machinery, state-of-the-art
infrastructural facilities, better links with raw material suppliers, and an established
network of purchasers have obviously made Baby Marine Group a leading Exporter
of processed marine Products to various international markets.
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Smart Financial entered the financial market only in 1992 but over this brief
span has covered a niche for itself by becoming leading financial service provider.
The company offers guidance to investors as to equities, commodities, mutual
funds, portfolio management services and insurance. It offers complete range of
financial solutions that encompasses every sphere of life.
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Starting off as a land developer and builder in 1962, Thakkers group

diversified into commercial production of agricultural and horticultural products,
housing real estate marketing, plantations.etc. They have provided shelter to more
than 40000 families by offering residential plots and premises. x Thakker
developer is the flagship company of the group. It was established as private
limited in 1987 and later went on to become the only public limited company in
North Maharashtra engaged in housing, commercial construction and land
development.
!
Mr. S.M Hegde, a chartered accountant by profession is the Jhief Finance

Officer of the Indian Multinational Videocon International and has been at the
helm of affairs for the last 20 years.
$#$&c'$&$c$% $
Mohanlal, the south Indian movie superstar has become a legend, a brand,
and cultural ambassador owing to various factors. Versatility and a natural flair for
donning complex characters have won him numerous accolades not to speak of
some unforgettable films contributed by him. x multifaceted personality, he has
some business ventures also which include Vismaya Max Film Post Production
Studio, Jollege for Dubbing xrtists at the infra film and Video Park,
Thiruvanathapuram. He is also the director of Uni Royal Marine Exports; a
ozhikode based major Seafood Export Jompany.
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Intellectual and knowledge arbitrage is the mantra of modern day business.

The same holds true for the financial markets. With the breadth and depth of
knowledge of modern day business that the Board of Hedge brings to the table, you
can be rest assured that some of the best minds in the business are taking care of
your investments.

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To create an ethical and sustainable financial services platform for our
customers and partner them to build business, to provide employees with meaningful
work, self-development and progression, and to achieve a consistent and competitive
growth in profit and earnings for our shareholders and staff.
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Ever since its inception, Hedge Equities has been a household name among
the masses owing our success to timely Professional financial assistance to our
clients. This aptly articulates our vision of µEvolving into a financial supermarket
which will be a one stop shop for all financial solutions¶.

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Being a Responsible Jorporate Jitizen, Hedge Equities has initiated a Non

Profit movement 1!c $2 which focuses on educating the masses about
Stock Market. The movement has also formulated various scholarship programs for
young and dynamic youth.
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Hedge Equities has a large network of branches with online terminals of NSE
and BSE in the Japital market and Derivative segments. The clients are assured of
prompt order execution through dedicated phones and expert dealers at our offices.
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Hedge Equities offers Internet trading through this site. You can trade through
the Internet from the comforts of your office or home, anywhere in the world. The
dedicated IT systems ensure service up time and speed, making Internet broking
through Hedge Equities hassle-free. Using the 'easiest' facility provided by NDSÑ, our
clients can transfer the shares sold by them online without delivery instruction slips.
xdditionally, digitally signed contract notes can be sent to clients through E-mail.
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Hedge Equities is a member of the National Securities Depository Ñimited

(NSDÑ), offer depository services with minimum xnnual Maintenance Jharges and
transaction charges. xccount holders can view their holding position through the
Internet. We also offer the ³easiest2 facility provided by NDSÑ (electronic access to
securities information and execution of secured transaction) through which clients can
give delivery instructions via the Internet.
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Hedge offer trading in the futures and options segment of the National Stock
Exchange (NSE). Through the present derivative trading an investor can take a short-
term view on the market for up to a three months¶ perspective by paying a small
margin on the futures segment and a small premium in the options segment. In the
case of options, if the trade goes in the opposite direction the maximum loss will be
limited to the premium paid.
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nowledge Jentre activities are intended to provide systematic and structured

services mainly to new investors and also to young aspirant aiming for a career in
financial markets. The centre has three functional areas: the publication Division, the
Training centre, and wealth management advisory service which provides complete
investment solutions to investors through knowledge based personalized service.
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Hedge Equities constantly strive to deliver insightful research to enable pro-

active investment decisions. The Research Department is broadly divided into two
divisions ± Fundamental xnalysis Group (FxG) and Technical xnalysis Group
(TxG). Our fundamental analysts are continuously scanning the entire economy for
discovering what they call the ³hidden gems´ in stock market terminology and present
it to our clients for profitable investments. x good Fundamental xnalysis team has the
capability to identify emerging businesses before such businesses become the talk of
the street and we are proud to say we have one such Fundamental xnalysis team.
Timing the market has always been the most difficult task for all analysts and our
Technical xnalysis Group has emerged to predict the market movements well in
advance using complex xnalytical methods including Elliot Wave Theory. We are
equipped with cutting-edge technologies for technical charting which assist our
technical analysts to predict both upside and downside movements efficiently for the
benefit of our clients.c
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Hedge Equities is a SEBI-approved portfolio manager offering discretionary

and non-discretionary schemes to its clients. Hedge Equities¶ portfolio management
team keeps track of the markets on a daily basis and is exposed to a lot of information
and analytic tools which an investor would not normally have access to. Other
technicalities pertaining to shares like dividends, rights, bonus, buy-back, Mergers
and xcquisitions are also taken care of by us. Maximize your returns by opting for our
PMS scheme.
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You can trade in commodity futures like gold, silver, crude oil, rubber etc. and
take advantage of the extended trading hours (10 am to 11 pm) in commodities
trading.
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We also offer Mutual Funds and Bonds. You can select from a wide range of
Mutual Funds and Bonds available in the markets today.
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Jurrency derivatives can be described as contracts between the sellers and

buyers, whose values are to be derived from the underlying assets, the currency
amounts. These are basically risk management tools in force and money markets used
for hedging risks and act as insurance against unforeseen and unpredictable currency
and interest rate movements. xny individual or corporate expecting to receive or pay
certain amounts in foreign currencies at future date can use these products to opt for a
fixed rate - at which the currencies can be exchanged now itself. Jurrency derivative
serve the purpose of financial risk management encompassing various market risks.
xn upfront premium is payable for buying a derivative.c
Jurrency Futures will bring in more transparency and efficiency in price

discovery, eliminate counterparty credit risk, provide access to all types of market
participants, offer standardized products and provide transparent trading platform.c
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£c RG Securities
£c Religare
£c Muthoot Securities
£c Sharewealth
£c Motilal Oswal
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The client relation department assists the client or customer top open an
account in HEDGE EQUITIES (P) ÑTD securities. This department is also known as
the front office. x client has to open two types of accounts to trade and own securities
in the NSE & BSE. They are:
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Thus a department, to organize financial activities may be created under the

direct control of the board of directors. Finance manager will decide the major
financial policy methods. Ñower levels can delegate the other routine activities.
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The major functions of marketing department are:
a)c '%c $$c #%- the company takes up the marketing
activities of the various branches. It ensures an efficient marketing arena at its
various branches. The company encourages better relations in its branches and
promotes for the development of various marketing strategies.
b)c '&$%c &#%- xn important function of marketing department is to
promote the name of the company. HEDGE EQUITIES (P) ÑTD does it
through the different promotional activities. The name of HEDGE EQUITIES
(P) ÑTD as a stock broking firm is made known to the outside world.
c)c %#%c &#%- The main clients of HEDGE EQUITIES (P) ÑTD
were its investors. Hence the marketing department tries to capture as many
investors as possible to encourage them to invest.
d)c &c &#%- Intraday trading is not always profitable and might
involve a lot of risk hence HEDGE EQUITIES (P) ÑTD promotes for delivery
were the shares are kept to be sold for a later date after analyzing the
profitability factors.
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The systems department is playing a vital role in the day to day operations of
the company. It is through the systems department that the clients can avail the
facilities of Internet trading. Optic fibre cables and high bandwidth connections from
the HEDGE EQUITIES (P) ÑTD office to the ISP, a dedicated server and back-up
ISDN connections were maintained directly by the systems department. For the
purpose of trading they have made use of two software namely ODIN (Open Dealers
Integrated Network).
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Human resource is often considered as the back bone of an organization even

in this age of advanced automation & mechanization. Since virtual organizations are
not very much popular in our part of the world, it is very important to any
organization to have a HR department. The presence of an excellent HR department
increases the efficiency of an organization considerably. Human resource
management is defined as asset of practices, policies and programmes designed to
maximize both personal and organizational goals.
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The selected employees will undergo three days continuous induction. During
this period, he will undergo training with all the department of HEDGE EQUITIES
(P) ÑTD Securities (India) Pvt. Ñtd. There will also be classroom induction also
within three months.
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The wages and salaries of the employees were fixed and granted by the HR
department with consent of the finance department
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It was human resources department which gives the promotions to all
employees, making transfers and taking disciplinary actions if needed
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The grievances of the employees were received only through proper channels
i.e., through the particular department heads. The HR department will make solutions
to the complaints as per the rules and regulations of the company.
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The department deals with the trading related activities of the company. The
trading refers to the buying & selling of shares. This department is the most important
part of the organization. There are two types of trading. They are:
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These are the trading terminal of the organization. The each computer of the
department is termed as the trading terminal. The each terminal is assigned with
NJFM certified dealers, who is in charge of each portal will do the trade according to
the client request. The terminal is managed by either NExT (National Exchange for
automated Trading) software or ODIN (Open Dealers Integrated Network) software.
The client can also place his through written request or through the telephone, in this
the order will be placed by the dealer.
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The internet trading is a facility provides by the company in order to trade the
securities from his convenient place like his office, home etc. the order will be placed
by the client itself, and he can make changes before the trade is done for changing the
price, cancellation of the order.
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Delivery refers to the shares that bought on a particular day are not sold on
that day itself and holding of the shares for an appreciation in the value of the security
and to trade it on a future date. Deliver Instruction Slip: it is a slip the client should
fill and gave to the dealer regarding the purchase of the share.
There are two procedures to move the share namely,
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This is which the Jlint signs at the time of opening a trading account and
depository participant account. If the client has given the power of attorney, HEDGE
EQUITIES (P) ÑTD will have the power to transact the clients stocks without pay-in
slips.
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It is secured internet enabled service which means¶ Electronic xccess to
Securities information and Execution of Secured Transaction¶. This is facility wherein
the clients can give delivery instructions via internet. Easiest is a facility provided by
JDSÑ.
The activities related with the depository department.
§c Depository function
§c Dematerialization
§c Pledging
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The function of the department is to study the details regarding the share or
security and to make predictions regarding the future performance of the company
The types of approaches done in the department
a)c Fundamental analysis

b)c Technical analysis
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Stock Exchange is an organized marketplace where securities are traded.
These securities are by the government, semi-government Bodies, Public sector
undertakings and companies for borrowing funds and raising resources. Securities are
defined as monetary claims and include stock, shares, debentures, bonds etc. If these
securities are marketable as in the case of Government stock, they are transferable by
endorsement and are like movable property. Under the securities Jontract Regulation
xct of 1956, securities trading are regulated by the Jentral Government and such
trading can take place only in Stock Exchange recognized by the Government under
this xct. xt present there are 23 recognized stock Exchanges in India.
Indian Stock Markets are one of the oldest in xsia. Its history dates back to
nearly 200 years ago.
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Bombay Stock Exchange is the oldest stock exchange in xsian with a rich
heritage, now spanning three centuries in its 133 years of existence. What is now
popularly known as BSE was established as ³The Native Share & Stock Brokers¶
xssociation´ in 1875. BSE is the first stock exchange in the country which obtained
permanent recognition (in 1956) from the government of India under the Securities
Jountracts (Regulation) xct 1956. BSE¶s pivotal and pre-eminent role in the
development of the Indian capital market is widely recognized. It migrated from the
open outcry system to an online screen- based order driven trading system in 1955.
Earlier an xssociation Of Persons (xOP), BSE is now a corporatized and
demutualised entity incorporated under the provisions of the companies xct, 1956,
pursuant to the BSE (Jorporatization and Demutualization) Scheme, 2005 notified by
the Securities and Exchange Board of India (SEBI). With demutualization, BSE has
two of world¶s best exchanges, Deutsche Borse and Singapore Exchange, as its
strategic partners. Over the past 133 years, BSE has facilitated the growth of the
Indian corporate sector by providing it with an efficient access to resources. There is
perhaps no major corporate in India which has not sourced BSE¶s services in raising
resources from the capital market.
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Ê

c
c
Today, BSE is the world¶s number 1 exchange in terms of the number of listed
companies and the world¶s 5th in transaction numbers. The market capitalization as on
December 31, 2007 stood at USD 1.79 trillion. xn inventor can choose from more
than 4700 listed companies, which for easy reference, are classified into x, B, S, T
and Z groups.The BSE Index, SENSEX, is Indian¶s first stock market index that
enjoys an iconic stature, and is tracked worldwide. It is an index of 30 stocks
representing 12 malor sectors. The SENSEX is constructed on a µfree-float¶
methodology, and is sensitive to market sentiments and market realities. xpart from
the SENSEX, BSE offers 21 indices, including 12 sectoral indicates. BSE has entered
into an index cooperation agreement with Deutsche Borse. This agreement has made
SENSEEX and other BSE indices available to investors in Europe and xmerica.
Moreover, Barclays Global Investors (BGI), the global leader in ETF¶S through its
Trader which tracks the SENSEX. The ETF enables investors in Hong ong to take
an exposure to the Indian equity market. BSE provides an efficient and transparent
market for trading in equity, debt instruments and derivatives. It has a nationwide
reach with a pressure in more than 450 cities and towns of India. BSE has always
been at par with the international standards. The systems and processes are designed
to safeguard market integrity and enhance transparency in operations.BSE is the first
exchange in India and the second is the world to obtain an ISO 9001:2000
certification. It is also the first exchange in India and the second in the world to
receive Information Security Management System Standard BS 7799-2-2002
certification for its BSE On-line Trading System (BOÑT).BSE continues to innovate.
In recent times, it has become the first national level stock exchange to launch its
website in Gujarati and Hindi to reach out to a large number of investors. It has
successfully launched a reporting platform for corporate bonds in India christened thec
IJDM or Indian Jorporate Dept Market and a unique ticker screen aptly named µBSE
Broadcast¶ which enables information dissemination to the common man on the
street. In 2006, BSE launched the Directors Database and IJERS (India Jorporate
Electronic Reporting System) to facilitate information flow and increase transparency
in Indian capital market. While the Directors database provides a single-point access
to information in the boards of directors of listed companies, the IJERS facilities the
Ê

Ê

c
c
corporate in sharing with BSE their corporate announcements. BSE also has a wide
range of services to empower investors and facilitate smooth transactions:
Investors Services: The Department of Investor Services redresses grievances of

investors. BSE was the first exchange in the country to provide an amount of Rs.1
million towards the investor protection fund; it is an amount higher than that of any
exchange in the country. BSE launched a nationwide investor awareness programme-
µsafe investing in the Stock Market¶ under which 264vprogrammes were held in more
than 200 cities. The BSE On-line Trading (BOÑT): BSE On-line Trading (BOÑT)
facilitates on-line screen based trading in securities. BOÑT is currently operating in
25,000 Trader Workstations located across over 450 cities in India.
BSEWEBX.com: In February 2001, BSE introduced the world¶s first centralized

exchange-based Internet trading system, BSEWEBX.com. This initiative enables
investors anywhere in the world to trade on the BSE platform.
Surveillance: BSE¶s On-line Surveillance System (BOSS) monitors on a real-time

basis the price movements, volume positions and members¶ positions an real-time
measurement of default risk, market reconstruction and generation of cross market
alerts.
BSE Trading Institution: BTI imparts capital market trading and certification, in
collaboration with reputed management institutes and universities. It offers over 40
courses on various aspects of the capital market and financial sector. More than
20,000 people have attended the BTI programmes.
Ê

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c#ccc cc !cc%&'(c$c"cc%&)&*c
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500410 xJJ Housing Related 0.55 0.77
500103 BHEÑ Japital Goods 0.35 3.26
532454 Bharti xirtel Telecom 0.35 3
532868 DÑF Universal Ñimited Housing related 0.25 1.02
500300 Grasim Industries Diversified 0.75 1.5
500010 HDFJ Finance 0.90 5.21
500180 HDFJ Bank Finance 0.85 5.03
500182 Hero Honda Motors Ñtd. Transport Equipments 0.50 1.43
Metal,Metal Products &

500440 Hindalco Industries Ñtd. 0.7 1.75
Mining
Hindustan Ñever
500696 FMJG 0.50 2.08
Ñimited
532174 IJIJI Bank Finance 1.00 7.86
500209 Infosys Information Technology 0.85 10.26
500875 ITJ Ñimited FMJG 0.70 4.99
532532 aiprakash xssociates Housing Related 0.55 1.25
500510 Ñarsen & Toubro Japital Goods 0.90 6.85
Mahindra & Mahindra
500520 Transport Equipments 0.75 1.71
Ñimited
532500 Maruti Suzuki Transport Equipments 0.50 1.71
532541 NIIT Technologies Information Technology 0.15 2.03
532555 NTPJ Power 0.15 2.03
500304 NIIT Information Technology 0.15 2.03
Ê

Ê

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c
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500312 ONGJ Oil & Gas 0.20 3.87

Reliance
532712 Telecom 0.35 0.92
Jommunications
500325 Reliance Industries Oil & Gas 0.50 12.94
500390 Reliance Infrastructure Power 0.65 1.19
500112 State Bank of India Finance 0.45 4.57
Metal, Metal Products,
500900 Sterlite Industries 0.45 2.39
and Mining
Sun Pharmaceutical
524715 Healthcare 0.40 1.03
Industries
Tata Jonsultancy
532540 Information Technology 0.25 3.61
Services
500570 Tata Motors Transport Equipments 0.55 1.66
500400 Tata Power Power 0.70 1.63
Metal, Metal Products &
500470 Tata Steel 0.70 2.88
Mining
507685 Wipro Information Technology 0.20 1.61
TxBÑE NO 4.1
£c DÑF replaced Dr. Reddy's Ñab on November 19, 2007.

£c aiprakash xssociates Ñtd replaced Bajaj xuto Ñtd on March 14, 2008.
£c Sterlite Industries replaced xmbuja Jements on uly 28, 2008.
£c Tata Power Jompany replaced Jipla Ñtd. on uly 28, 2008.
£c Sun Pharmaceutical Industries replaced Satyam Jomputer Services on anuary
8, 2009
£c Hero Honda Motors Ñtd. replaced Ranbaxy on une 29, 2009
£c Jipla to replace Sun Pharma from May 3, 2010
£c Grasim replaced SPÑ in 2010
Ê

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£c HJ (health care)
£c RExÑITY
£c xUTO
£c METxÑ
£c IT
£c JG (capital goods)
£c ONG (oil and gas)
£c POWER
£c PSU
£c JD (consumer durables)
£c BxN
£c TEJH
£c FMJG
½
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xJJ, BHxRTI xIRTEÑ, BHEÑ, DÑF, GRxSIM, HDFJ, HDFJ BxN,
HINDxÑJO, HUÑ, IJIJI BxN, INFOSYS, ITJ, xIPRxxSH
xSSOJIxTES, Ñ&T, MxHINDRx & MxHINDRx, MxRUTI SUZUI, ONGJ,
NTPJ, RxNxBxXY ÑxB, REÑIENJE, REÑIENJE JOMM, REÑIENJE
INFRxSTRUJTURE, SxTYxM, SBI, STERÑITE INDUSTRY, TxTx MOTORS,
TxTx POWER, TxTx STEEÑ. TJS, WIPRO.
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With the liberalization of the Indian economy, it was found inevitable to lift
the Indian stock market trading system on par with the international standards. On the
basis of the recommendations of high-powered Pherwani Jommittee, Industrial
Development Bank of India, Industrial Jredit and Investment Jorporation of India,
Industrial Finance Jorporation of India, all Insurance Jorporations, selected
commercial banks and others incorporated the National Stock Exchange in 1992.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Japital market.
There are two kinds of players in NSE:

(a) Trading members and
(b) Participants.
Trading at NSE takes place through a fully automated screen-based trading
mechanism, which adopts the principle of an order-driven market. Trading members
can stay at their offices and execute the trading, since they are linked through a
communication network. The prices at which the buyer and seller are willing to
transact will appear on the screen. When the prices match the transaction will be
completed and a confirmation slip will be printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as
follows:
§c NSE brings an integrated stock market trading network across the nation.
§c Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the
securities.
§c Delays in communication, late payments and the malpractice's prevailing in
the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.
c c
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9 $%$ c*c/$%! 5cc

REÑIxNJE INDUSTRIES ÑTD, OIÑ xND NxTURxÑ GxS JORPORxTION
ÑTD, BHxRTI xIRTEÑ ÑIMITED, NTPJ ÑTD, REÑIxNJE JOMMUNIJxTIONS
ÑTD., IJIJI BxN ÑTD,
INFOSYS TEJHNOÑOGIES ÑTD, TxTx JONSUÑTxNJY SERVIJES ÑTD,
BHEÑ, STxTE BxN OF INDIx,
STEEÑ xUTHORITY OF INDIx, ÑxRSEN & TOUBRO ÑTD., HERO HONDx
MOTORS ÑTD, ZEE ENTERTxINMENT ÑTD, INDIxN PETROJHEMIJxÑS
JORPORxTION ÑTD., JIPÑx ÑTD, BHxRxT PETROÑEUM JORPORxTION
ÑTD.,VIDESH SxNJHxR NIGxM ÑTD, DR. REDDY'S ÑxBORxTORIES,
MxHxNxGxR TEÑEPHONE NIGxM ÑTD, GÑxXOSMITHÑINE PHxRMx

ÑTD.,xBB ÑTD. POWER GRID JORPORxTION OF INDIx, REÑIxNJE
ENERGY ÑTD, SIEMENS ÑTD, xJJ ÑIMITED, xMBUx JEMENTS ÑTD,
HJÑ TEJHNOÑOGIES ÑTD, HINDxÑJO INDUSTRIES ÑTD,
NxTIONxÑ xÑUMINIUM JO ÑTD, SUN PHxRMxJEUTIJxÑS IND.,

MxHINDRx & MxHINDRx ÑTD, TxTx POWER JO ÑTD, PUNxB
NxTIONxÑ BxN, RxNBxXY ÑxBS ÑTD, ITJ ÑTD, REÑIxNJE
PETROÑEUM ÑTD., HDFJ ÑTD, WIPRO ÑTD, STERÑITE INDUSTRIES ÑTD.,
HDFJ BxN ÑTD, TxTx STEEÑ ÑIMITED, HINDUSTxN UNIÑEVER ÑTD.,
SUZÑON ENERGY ÑIMITED, GxIÑ (INDIx) ÑTD, GRxSIM INDUSTRIES ÑTD,
TxTx MOTORS ÑIMITED, MxRUTI UDYOG ÑIMITED
c +cc%,-./%% c c
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1 United States New York Stock Exchange 13041 1439

2 United States NxSDxQ 3649 954
3 apan Tokyo Stock Exchange 3542 311
4 United ingdom Ñondon Stock Exchange 3354 229
5 Hong ong Hong ong Stock Exchange 2696 179

6 Europe Euronext 2695 165
7 Jhina Shanghai Stock Exchange 2681 686
8 Janada Toronto Stock Exchange 2002 134
9 India Bombay Stock Exchange 1540 231
10 India National Stock Exchange of 1503 791
India
11 Brazil BM&F Bovespa 1447 704
12 Germany Deutsche Börse 1320 123
13 xustralia xustralian Securities 1309 101
Exchange
14 Jhina Shenzhen Stock Exchange 1284 548
15 Switzerland SIX Swiss Exchange 1122 674
16 Spain BME Spanish Exchanges 1077 149
xmericas 21244 2617
xsia - Pacific 18287 2262
Europe - xfrica - Middle 13975 954
East
$ i@
Ê

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International portfolio flows, as are commonly known as cc
c c flows, refer to capital flows made by individual and institutional
investors across national borders with a view to creating an internationally diversified
portfolio.
µFII¶ include ³Overseas pension funds, mutual funds, investment trust, asset
management company, nominee company, bank, institutional portfolio manager,
university funds, endowments, foundations, charitable trusts, charitable societies, a
trustee or power of attorney holder incorporated or established outside India
proposing to make proprietary investments or investments on behalf of a broad-based
fund.
Foreign institutional investor means an entity established or incorporated

outside India which proposes to make investment in India. Positive tidings about the
Indian economy combined with a fast-growing market have made India an attractive
destination for foreign institutional investors.
Unlike Foreign Direct Investment (FDI) flows which refer to that category of
international investment aimed at obtaining a lasting interest by a resident entity in
one economy in an enterprise resident in another economy by way of exercising
significant control over its management, FII flows are not directed at acquiring
management control over foreign companies. FII flows were almost non-existent until
1980s. Global capital flows were primarily characterized by syndicated bank loans in
1970s followed by FDI flows in 1980s .
But a strong trend towards globalization leading to widespread liberalization

and implementation of financial market reforms in many countries of the world had
actually set the pace for FII flows during 1990s.
Ê

Ê

c
c
xccording to 0 c"c1 2c.///, FII investment as a proportion of a

developing country's GDP increases substantially with liberalization as such
integration of domestic financial markets with the global markets permits free flow of
capital from 'capital-rich' to 'capital-scarce' countries in pursuit of higher rate of return
and increased productivity and efficiency of capital at global level.
Diversifying internationally i.e., holding a well-diversified portfolio of

securities from around the world in proportion to market capitalizations, irrespective
of the investor's country of residence, has long been advocated as the means to reduce
overall portfolio risk and maximize risk-adjusted returns by the classical capital asset
pricing model (JxPM). But a persistent 'home bias' (i.e., the tendency to hold a
greater proportion of stocks from the home country vis-a-vis the foreign country) was
noticed in the portfolios of investors in capital-rich industrialized countries in early
1990s.
With more and more c 0c cc1 deregulating their
financial markets by eliminating foreign exchange controls, reducing taxes imposed
on foreign investors, relaxing the restrictions on the purchase / sale of securities by
foreign investors in domestic markets etc., such 'home bias' has decreased over the
years. Today, EMEs, by virtue of their lower correlations in stock market returns with
the developed markets, offer greater scope to investors in developed countries to
reduce their overall portfolio risk and effectively enhance the portfolio performance
and hence have become the most preferred destinations for FII flows.
Several research studies on FII flows to EMEs over the world have highlighted
that financial market infrastructure such as the market size, market liquidity, trading
costs, extent of information dissemination etc., legal mechanisms relating to property
rights etc., harmonization of corporate governance, accounting, listing and other rules
with those followed in developed markets, and strengthening of securities markets'
enforcement are important determinants of foreign portfolio investments into
emerging markets. Of late, the Securities and Exchange Board of India (SEBI) and
Reserve Bank of India (RBI) have initiated a string of measures like allowing
Ê

Ê

c
c
overseas pension funds, mutual funds, investment trusts, asset management

companies, banks, institutional portfolio managers, university funds, endowments,
foundations or charitable trusts etc. but banning non-resident Indians (NRIs) and
overseas corporate bodies (OJBs) from trading as foreign portfolio investors, raising
the caps for FII from 24% to 49% of a non-bank company's issued capital subject to
sectoral caps / statutory ceiling as applicable, enhancing the individual investment
limit from 5% to 10% of issued capital, permitting foreign investors to trade in
Government securities and derivatives, easing the norms for FII registration, reducing
procedural delays, lowering fees, mandating stricter disclosure norms, improved
regulatory standards etc. with a view to improving the scope, coverage and quality of
FII flows into India. xs a result, India, also supported by her strong economic
fundamentals, has become one of the attractive destinations for FII flows in the
emerging market space today. The expansionary effect of various reform measures on
FII flows over the years can be gauged from the fact that net (i.e., gross purchases
minus gross sales) FII flows into India have risen sharply from Rs. 5126 crore in
1993-1994 2 to Rs. 46,215 crore in 2004-2005, with the number of foreign
institutional investors being registered with SEBI increasing from 3 in 1993-1994 to
685 in 2004-2005 c 3c c 4$*c This increasing dominance of foreign
investors in Indian market has necessitated research on the implications of FII flows
for the Indian stock market time and again.
xlthough FII flows help supplement the domestic savings and augment
domestic investments without increasing the foreign debt of the recipient countries,
correct current account deficits in the external balance of payments' position, reduce
the required rate of return for equity, and enhance stock prices of the host countries,
yet there are worries about the vulnerability of recipient countries' capital markets to
such flows. FII flows, often referred to as 'hot money' (i.e., short-term and overly
speculative), are extremely volatile in character compared to other forms of capital
flows.
Ê

Ê

c
c
Foreign portfolio investors are regarded as 'fairweather 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.
Often, they have been blamed for exacerbating small economic problems in the host
nation by making large and concerted withdrawals at the slightest hint of economic
weakness. It is also alleged that as they make frequent marginal adjustments to their
portfolios on the basis of a change in their perceptions of a country's solvency rather
than variations in underlying asset value, they tend to spread crisis even to countries
with strong fundamentals thereby causing 'contagion' in international financial
markets 5 "-%&&&*cc
c
c
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Portfolio investments in India include investments in xmerican Depository Receipts

(xDRs)/ Global Depository Receipts (GDRs), Foreign Institutional Investments and
investments in offshore funds. Before 1992, only Non-Resident Indians (NRIs) and
Overseas Jorporate Bodies were allowed to undertake portfolio investments in India.
Thereafter, the Indian stock markets were opened up for direct participation by FIIs.
They were allowed to invest in all the securities traded on the primary and the
secondary market including the equity and other securities/instruments of companies
listed/to be listed on stock exchanges in India
In 2004, FII investments crossed $9 billion, the highest in the history of Indian
capital markets.
The total net investment for the year up to December 29 stood at US$9,072 million
while foreign investors pumped in about US$2,113 million in December.
orea and Taiwan have always been the biggest recipients of FII money. It was only
in 2004 that India managed to receive the second highest FII inflow at over $8.5bn.
Ê

Ê

c
c
In 2005 FIIs invested more in Indian equities than in orean or Taiwanese equities.
On 9th March 2009, India's exceptional growth story and its booming economy have
made the country a favourite destination with foreign institutional investors (FIIs). It
has continued to attract investment despite the Satyam non-governance issue and the
global economic contagion impact on Indian markets.
They are also the most successful portfolio investors in India with 102 per cent
xppreciation since September 30, 2003.

xs per SEBI, number of registered FIIs stood at 1626 and number of registered sub-
accounts stood at 4972 as on March 17, 2009
c
&%c%c%#%-
Foreign Institutional Investors are not permitted to invest in equity issued by an xsset
Reconstruction Jompany. They are also not allowed to invest in any company which
is engaged or proposes to engage in the following activities:
£c Business of chit fund

£c Nidhi Jompany
£c xgricultural or plantation activities
£c Real estate business or construction of farm houses (real estate business does
not include development of townships, construction of residential/commercial
premises, roads or bridges).
£c Trading in Transferable Development Rights (TDRs).
Ê

Ê

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c
c
c
c
c
) c
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£c Sustaining the growth momentum and achieving an annual average growth of

9-10 % in the next five years.
£c Simplifying procedures and relaxing entry barriers for business activities and
Providing investor friendly laws and tax system.
£c Jhecking the growth of population; India is the second highest populated
country in the world after Jhina. However in terms of density India exceeds
Jhina, as India's land area is almost half of Jhina's total land. Due to a high
population growth, GNI per capita remains very poor. It was only $ 2880 in
2003 (World Bank figures).
£c Boosting agricultural growth through diversification and development of agro
processing.
£c Expanding industry fast, by at least 10% per year to integrate not only the
surplus labour in agriculture but also the unprecedented number of women and
teenagers joining the labour force every year.
£c Developing world-class infrastructure for sustaining growth in all the sectors
£c xllowing foreign investment in more areas.
£c Effecting fiscal consolidation and eliminating the revenue deficit through

revenue enhancement and expenditure management.
$&*c
#c%cc&c$&c
Foreign Portfolio investments in India come in the form of investments in xmerican

Depository Receipts (xDRs)/ Global Depository Receipts (GDRs), Foreign
Institutional Investments and investments in Offshore funds.
However, FIIs constitute a major proportion of such portfolio. The share of FIIs in
total portfolio flows was as high as 95.97% in 2003-04 and 93.25% in 2004-05. It
Ê

Ê

c
c
declined to 46% in 2006-07. This decline in FII investment in 2006-07 can be

attributed to global developments like meltdown in global commodities markets and
equity market during the three month period between May 2006 to uly 2006, fall in
xsian Equity markets, tightening of capital controls in Thailand and its spill over
effects.
The share of FII investment in total portfolio investment for 2007-08 is provisionally
estimated to be 69.15%. The large FII inflows (net) in 2007-08 at USD 16 billion as
against USD 6.7 billion in 2006-07 reflects increased participation of FIIs in the
primary market as corporates raised large resources through 85 initial public offerings
(IPOs) and 7 follow-on public offers (FPOs) aggregating to Rs 545,110 million. (US $
13,638 million).
Ñooking at monthly trend in FII investments during 2007-08 it can be seen that net
FII investment has been positive during most of the months. The months of xugust
2007, November 2007, anuary, 200 8 and March, 2008 saw net outflows of FII
investment, with the largest pull out of US $ 2727 mn in anuary, 2008.
During 2008-09, till une 2008, FIIs have been net sellers to the tune of US $ 4,189
million. This can be attributed to the generally weak sentiments of investors following
the global credit crisis which has engulfed the developed countries and is seen to be
affecting the developing countries as well.
c
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c
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By Sensex return
£c From 2000-2010
£c In 2010 ( monthly basis5c
c
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By Sensex return V/S FII¶s net inflow
£c From 2000-2010
£c In 2010 (monthly basis)
Number of FII¶s registered and the Sensex returns
c <c "
üc0+c 8c
£c Joefficient of Jorrelation method

£c Regression method
c c c cc <c 0 c

c
£c Trend analysisc
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cccc c
cc ccc
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c cccccccccccccccccc c cccccccccccccccccccc c cccccccccccccccccccccc

c ccccccccccccccccccc
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c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
c c c c c
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c c c c c
c c c c c
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ccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc TxBÑE NO: 5.1
Ê

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ccccccccccccccccccccccccccccccccccccccccccccccc cJHxRT NO 5. 1
c c
Ê

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c
ccThe Bombay stock exchange (BSE SENSEX) which is one of the most important
secondary market in India ,has seen many ups and downs from its years of its starting
in 1991. The market opened at 1027.38 point and closed at 1908.85 with a high value
of 1955.29 and with a low value of 947.14 in the same year.
Since then, the values in the Sensex has increased and decreased. From the table, it
can be found that the Sensex crossed the four digit number in 2006 , and at 13786.91
from the previous year value of 9397.93 (2005)
The changes in the value of Sensex depends upon many factors, like ..
£c National and global issues

£c Ñegal and political issues
£c GDP growth rate of the nation
£c xctivities of the foreign investments
Etc«.
From the table it is found that in the year 2008 the Sensex closed at 9647.31 from the
previous years 20286.99. The reason for the huge fall in market was due to global
recession which not only caught Indian market but also the over all international
markets too
When the recession began to end in the world, the Sensex and other markets could
see increase in value. xnd at the end of 2010 the Sensex closed at 20509.09
c c
Ê

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c
@ccccc "c
c 8c c0+c <cc 0 c
ccccccccccccccccccccccccccccccc ccccccccccccc
cTxBÑE OF SENSEX RETURN FROM 2000-10
YExR SENSEX RETURN( %)
2000 6 c
2001 666c -17.869
2002 66c 3.523
2003 6 c 72.889
2004 á c 13.079

2005 6 6c 42.334
2006 6 c 46.701
2007 á c 47.146
2008 6c -46.522
2009 c 81.032
2010 á á á c 17.177
ccccccccccccccccccccccccccccccccccccccccccccccc c
ccccccccccccccccccccccccccccccccccccccccccccccccccc TxBÑE NO 5.2
The BSE SENSEX performance is calculated on a percentage basis from the year
2000 to 2010. Sensex return in percent, is calculated by the % change in the closing
point of the Sensex in previous year to the current year
Ê

Ê

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JHxRT NO 5.2
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áác 66ác ác 6ác
áá c 6 áác 6 ác ác
áác 6 á6ác á 6c 6ác
áác á c 6 c á áá c
áác á ác 6á ác R 6á ác
áá c áá ác á6 ác 6ác
ááR c 6 ác 6 áác 6c

c
Source : moneycontrol.com
TxBÑE NO 5.3
c c
Ê

Ê

c
c
cccccccccccccccccccccccccccccccccccccccccccccccccccc c
ccccc <c c "

üc

áááá
ááááá
áááá
c c
R áááá
Rááááá
c
JHxRT NO 5.3
Ê

Ê

c
c
c c c "

üc0c 8c c
YExR cc c c RETURN (%)
2001 6 ác -17.869
2002 6c 3.523
2003 6ác 72.889
2004 6ác 13.079
2005 ác 42.334
2006 6ác 46.701
2007 á áá c 47.146
2008 R 6á ác -46.522
2009 6ác 81.032
2010 6c 17.177
ccccccccccccccccccccccccccccccccccccccccccccccccccc TxBÑE NO 5.4
ccccccccccccccccccccccccccccccc c
c
Ê

Ê

c
c
cccccccccc 8c c9:5c0+c c c "

üccccc
áááá
ááááá
áááá
c c

c
á
6 á
R áááá
Rááááá
ccccccccc ccccc
JHxRT NO 5.4
INTERPRETxTION
When comparing the Sensex returns and the FII net inflow from the years , it can be
found that the Sensex gain height returns in the year 2009 (81.03%) and the FII net
inflow at that year was 85367 Jr.
xnd the Sensex loss maximum point (-46.522) when the net inflow was - 53051 Jr in
the year 2008. Recession and many other global and national issues were key factors
for this change.
The negative sign show that in 2008 FII¶s were not investing their money. They were
sellers.
*(The Sensex return is not only depend upon FII)*
c
Ê

Ê

c
c
c "c
c 8c c
c <c 0 c@ i cccc
TxBÑE OF SENSEX RETURN 2010
MONTH SENSEX POINT % GxIN

xN 16357.96
FEB 16429.55 0.437
MxR 17527.77 6.68
xPR 17558.71 0.1765
MxY 16944.63 -3.49
UN 17700.90 4.463
UÑY 17868.29 0.945
xUG 17971.12 0.575
SEP 20069.12 11.670
OJT 20032.34 -0.183
NOV 19521.25 -2.55
DEJ 20509.09 5.06
TxBÑE NO 5.5
The Sensex gain maximum return 11.670% during the month of September 2010.
xnd loss -3.49% in May by making the Sensex to close at 16944.63
Ê

Ê

c
c
JHxRT OF SENSEX RETURN 2010
¦ ¦

á
c
á
6 á
R
R
R
JHxRT NO 5.5
Ê

Ê

c
c
c c "

üc c@ i c
c
TxBÑE OF FII NET INFÑOW 2010
MONTH GROSS GROSS SxÑE Jr NET INFÑOW
PURJHxSE Jr ( Jr)
xN 620070.30 62373.20 5902.40
FEB 40795.70 38682.20 2113.50
MxR 60009.60 41176.00 18833.60
xPR 61602.90 51838.40 9764.50
MxY 50614.80 59244.70 -8629.90
UN 54930.60 44686.00 10244.60
UÑY 59332.40 42211.80 17120.60
xUG 61973.40 50788.10 11185.30
SEP 81024.80 51829.00 29195.80
OJT 85490.20 51829.00 29195.80
NOV 89082.60 70562.70 18519.90
DEJ 61475.30 59999.20 1416.10
TOTxÑ 768402.60 634110.70 140497.20
Source : moneycontrol.com
TxBÑE NO 5.6
Ê

Ê

c
c
JHxRT OF NET INFÑOW 2010
½ ½
6 ááá
6áááá
ááá
áááá
ááá
áááá ½ c½

ááá
á

à
R ááá
Ráááá
R ááá
JHxRT 5.6
Ê

Ê

c
c
cc 8c) c0c c c "

üc@ i c
TxBÑE NO 5.7
MONTH SENSEX GxIN (%) FII NET INFÑOW

(Jr)
FEB 0.437 2113.50
MxR 6.68 18833.60
xPR 0.1765 9764.50
MxY -3.49 -8629.90
UN 4.463 10244.60
UÑY 0.945 17120.60
xUG 0.575 11185.30
SEP 11.670 29195.80
OJT -0.183 29195.80
NOV -2.55 18519.90
DEJ 5.06 1416.10
Ê

Ê

c
c
6 ááá
6áááá
ááá
áááá
ááá
ààcc
áááá
c c c
ááá
á

à
R ááá
Ráááá
R ááá
JHxRT NO 5.7
INTERPRETxTION
From the given table, the Sensex gain maximum return 11.670% during the month of
September 2010 when the FII¶s inflow was 29195 Jr.. xnd the Sensex loss -3.49% in
the month of May, where the FII net inflow was -8629.90.
That means the Sensex was changing according to the inflow and out flow of
investment during the months of 2010.
*(The Sensex return is not only depend upon FII)*
cccccccccccccccccccccc c
Ê

Ê

c
c
c
cc c c 'c

c c6c 8c c9:5c
cccccccccccccccccccccccccccccccccc'"c
c c
YExR NO OF FII SENSEX

REGISTERD RETURN (%)
2003 517 72.889
2004 637 13.079
2005 823 42.334
2006 993 46.701
2007 1219 47.146
2008 1594 -46.522
2009 1706 81.032
2010 1747 17.177

á

á6
ààc

áà
áá
6
JHxRT NO 5.8
Ê

Ê

c
c

c
cccccccccccccToday ,there are 1747 FII registered in the country as against last year number
of 1706 an additional of 41. Year 2009 saw 112 FII getting registered. This means
despite record inflow, the number of registered FII s has declinedc cn fact this is the
lowest addition in any calendar year from the data analyzed from 2003. This means
that the investment that the Indian market has received is majority through the FII
registered earlier
ccccccc
c c
Ê

Ê

c
c
c $ $%c c && $%c .%c c %#%c $%c %/c

##%
xnalysis is done for finding the correlation between FII investment and the sensex
fluctuation during the period from 2000-2010. Net yearly FII investment is calculated
by subtracting the gross sell value from the gross purchase value in the particular year
by FII. xnd the fluctuation in sensex is calculated by subtracting previous years
closing point from the current year.
ccccccccccccccccccccccccc " "

c
c 8c "
c
c ààc

àc
c áá c c
c
ááác 6 c Rá66ác
áác 666c Rá c
áác 66c c
áá6c 6 c c
áác á c 66c
áá c 6 6c c
áác 6 c 6 c
áác á c áááác
áác 6c Rá6 c
áá c c ác
áác á á á c 6ác
TxBÑE NO 5.9
Ê

Ê

c
c
%$ cc
TxBÑE OF JORREÑxTION
YExR NET FII FÑUJTUxTIONS Dx= X-c=x/11 Dy=Y-c=Y/11

INFÑOW (X) IN BSE (Y)
2000 6370.50 -1033.70 2391.0 -2505
2001 13294.70 -709.79 9315.2 -2181.09
2002 3627.27 114.95 -352.23 -1356.35
2003 29953.20 2641.68 25973.7 1170.38
2004 38688.40 763.73 34708.9 -707.57
2005 77106.68 2795.24 73127.18 1323.94
2006 31281.08 4388.98 27301.58 2917.68
2007 70940.05 7000.08 66960.55 5528.78
2008 -53051.70 -10639.68 -57031.2 -12110.98
2009 85367.60 7817.50 81388.1 6346.2
2010 134167 3044.28 130187.5 1572.98
TxBÑE NO 5.10
=X=437744.8Jr
Mean , =X/11 =3979.5Jr
=Y = 16183.67 Jr
Mean =y/11 =1471.3Jr
Ê

Ê

c
c

F n u
n
n S
n
v
h

od 2000-2010c
à
à
/
à /

à
/
à /

J J
Ji itJl ti

/

!"R R"! !#
!$ Ji it Jl ti %%l&i& 't ()& t il* % à& t
+ ,i &%-l%ti *$i-$i&%l*,.&iti -l%ti
t$%t+%&t$à&+/+ti&t+0-$l%ttt$(i/&t+t0i,t$
.icááác cáá
cc

Ê Ê cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc c c
c
c
# $
F n u n n S n v! "h ! od 2000-2010c
¦ ¦àà

" àà
(
à" à"( 1J!1 !#

it$+ti-+% J
àt%%/i%ti
-l%ti-i-it
R,&&i20%tii& '
R,&&i-i-it' à #(/à #(

/

3$J
!"R R"! !#
!$ ,&&i %%l&i& 't* ()& i/&t+t % à& l0-t0%ti ,i/& %
20%ti 3$i-$,i/&%,%ti/à&l0-t0%ti*$%
/%l0()& "! ( #3
i&,i/
%
Ê & Ê cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc c c
c
c
JORREÑxTION BETWEEN FII & BSE FÑUJTUxTIONS IN THE YExR 2010
TxBÑE TO FIND STxNDERD DEVIxTION
MONTH NET FII FÑUJTUxTIONS Dx= X-cX Dy=Y-c=Y/11

INFÑOW (X) IN BSE (Y)
FEB 2113.5 71.59 -10519.28 -305.78
MxR 18833.6 1098.22 6200.82 720.85
xPR 9764.5 30.94 -2868.28 -346.43
MxY -8629.5 -614.08 -21262.68 -991.45
UNE 10244.6 756.27 -2388.18 378.90
UÑY 17120.6 167.39 4487.82 -209.98
xUG 11185.3 102.83 -1447.48 -274.54
SEP 29195.8 2098.00 16563,02 1720.63
OJT 29195.8 -36.78 16563.02 -414.15
NOV 18519.9 -511.09 5887.12 -888.46
DEJ 1416.10 987.84 -11216.78 610.47
TxBÑE 5.11
X = 1389606
Mean = X/11 = 12632.78
Y = 4151.13
Mean = Y/11 = 377.37
Ê

Ê

c
c
'' ' *+ 2 3
F () n u, n-, .n S, n),/ .v,0 1h, ,0 od 2000-2010c
à
¦

à
/
/

à
/
/

J J J¦¦"

Ji-itJl%ti

¦ ¦

t i& % $i,$ , .&iti/ -l%ti t$%t +%& i t$ % t$ &&
+/+ti&%l+&ti-tl..ti%ltt$+/+t&()&i/&t+t&
4
Ê 5 Ê cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc c c
c
c
ccc c "c
ccccccccccccccccccccccccccccccccc
ccccccccccccccccccccccccccccc TxBÑE OF TREND xNxÑYSIS
YExR cc c cc % JHxNGE

2000 6á ác 100.00
2001 6 ác 208.69
2002 6c -56.93
2003 6ác 470.18
2004 6ác 607.30
2005 ác 1210.37
2006 6ác 491.02
2007 á áá c 1113.57
2008 R 6á ác -832.76
2009 6ác 1340.04
2010 6c 2106.06
TxBÑE NO 5.12
Ê

Ê

c
c
Here the base year is 2000, in which FII net inflow was 6370.50 Jr. xnd it is assigned
as 100 point. The trend analysis is conducted by calculating percentage change in FII
net inflow in each year in relation to the base year

c
From the analysis it is known that the net inflow of money by FII during the period
from 2001-08 is fluctuating in nature. The growing Indian economy and increasing
GDP growth rate has resulted in a positive trend towards FII investment, and from
the year 2009 it is increasing in nature.
Ê

Ê

c
c
c
c c "c
cccccccccccccccccccccccccccccccccc TxBÑE OF TREND xNxÑYSIS
YExR NET X X2 XY
INFÑOW(Y)
2006 31281.08 -2 4 -62562.16
2007 70940.05 -1 1 -70940.05
2008 -53051.70 0 0 0
2009 85367.60 1 1 85367.60
2010 134167.00 2 4 268334.00
cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc c
cccccccccccccccccccccccccccccccccccccccc TxBÑE NO 5.13
a = y/n = 268704.03/5
= 53704.806
b = (XY)/(X2) = 220199.39/10
= 22019.939
Future year , Y = a + b X. BY putting the value of X as 3,4,«7
Ê

Ê

c
c
ccccccccccccccccccc cccccccccccccccTxBÑE OFcFUTURE TREND xNxÑYSIS
YExR NET INFÑOW (FUTURE) IN Jr
119800.62
2011
2012 141820.562
2013 163840.501
2014 185860.44
2015 207880.379
TxBÑE NO 5.14
Ê

Ê

c
c
TREND xNxÑYSIS
áááá
ááááá
áááá

67
c c

7
ááááá
áááá
á
6
JHxRT NO 5.9

c
From the trend analysis (advanced) of FII net inflow to the Indian economy, it is
found that the trend is increasing in nature. That means the FII¶s will increase their
inflow of money in future also.
Ê

Ê

c
c
c
ccccccccccccccccccccc c
ccccccccccccccccccccc cccccccccccccccccccccccccc c0c

)4c
"
c6c))
c
Ê

Ê

c
c
c
cccccccc
icc )c
c
c
c 8c
£c From the study it is found that the performance of Sensex is fluctuating.

The Sensex saw many ups and downs from its opening year 1991
cccccc <c "

üc
c c(c
£c The study on the inflow of FII to the Indian equity market has shown that
the inflow is also fluctuating and it is increasing in recent years.
'c
c)c <c0+c 8c c
£c The study on increasing number of FII registered under by SEBI, shows

that the value of Sensex is not much related to the number of FII
registered in recent years .Today ,there are 1747 FII registered in the
country as against last year number of 1706 an additional of 41. Year
2009 saw 112 FII getting registered. This means despite record inflow, the
number of registered FIIs had declined c This means that the investment
that the Indian market has received is majority through the FII registered
earlier
"
c 'ü c <c 0 c c 8c
c
£c From the correlation study between sensex movement and FII inflow ,
found that the fluctuations in sensex is not much related to the FII
investment
)c
cc c "c
From the trend analysis it is observed that the trend in FII inflow to the
Indian economy is positive in nature.
Ê

Ê

c
c
c
@cc
"
c
c
Foreign Institutional Investors, who invest their money in different
countries in order to get a good portfolio of investment. xnd India has been in the
list of their portfolio for many years. The increasing GDP growth rate and the
overall development of India in different sectors like industrial and agricultural
field and others are the prime reason for the increasing nature of FII¶s inflow.
There is a positive correlation between stock indices and FIIs but FIIs didn¶t
have any significant impact on Indian Stock Market. xlso the coefficient of
determination is less in all the case. It shows the absence of linear relation
between FII and stock index. This does not mean that there is no relation between
them. One of the reasons for absence of any linear relation can also be due to the
sample data. The data was taken on yearly basis. xlso FII is not the only factor
affecting the stock indices. There are other major factors that influence the
bourses in the stock market. xnd from the FII¶s analysis on Sensex return, it can
be concluded that FII do have any significant impact on the Indian Stock Market
but there are other factors like government policies, budgets, bullion market,
inflation, economical and political condition, etc. do also have an impact on the
Indian stock market.
c c
Ê

Ê

c
c
c
cc))
c6c

c
xfter the analysis of the project study, following recommendations can be made:
£c From the analysis there could not find a good positive relationship between
FII's and sensex return (may be because of the data collected is on the yearly
basis & sensex return is not only dependent upon FII's investment only). They
are need to be encouraged to enter in Indian market. Because their absence
result in huge change in the market
£c Number of FII's get registered is decreasing in nature . It may be because of

nature of procedure. Simplifying procedures and relaxing entry barriers for
business activities and providing investor friendly laws and tax system for
foreign investors helps them to come and invest in India
£c Somewhere, a restriction related to the track record of Sub- xccounts is also

to be made on the investors who withdraw money out of the Indian stock
market .
£c Encourage industries to grow to make FIIs an attractive junction to invest.
c c
Ê

Ê

c
c
c
''"
)c
'
( c
I.M Panday ³ c -c Vikas Publishing house Private ltd, New
Delhi, 2009
othary JRc 6 #c#"27c New xge International Publishers, New Delhic
2006c
Prasanna Jhandra, 8 c 9, Tata McGraw ± Hill publishing

company Ñtd, New Delhi. 2001.
Uma Sekaranc-7 #c#"2c c-cohn Wile xnd Sons,Incc
ü'
www . bse.india..com
www . nse india. com
www. moneycontrol. . com
www.hedgeequities.com
www.sebi.com
Ê

Ê

c

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c

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

§c To know the Indian stock exchange market- BSE, NSE

§c To study the performance of Sensex over the period 2000-10

§c To know about FII

§c To study the effect of FII¶s investment in BSE sensex

§c To get in touch with the industrial and organizational environment.

§c To familiarize with the importance of FII in Indian stock market

Secondary data refers to the data collected from;

FII͛s Influence On Sensex Over The Period 2000-2010c

§c Jompany manuals etc.

Jhapter 1 : Deals with Introduction. It includes objectives of the Study, Scope of

Jhapter 2 : Industry Profile - ³Stock Market´.

Jhapter 3 : Jompany Profile - ³HEDGE EQUITIES´.

Jhapter 4 : Theoretical Framework ±Indian stock market & Foreign Institutional

Jhapter 5 : xnalysis and Interpretation

oc xnalysis of the performance of BSE over the years

oc xnalysis of the FII inflow to Indian stock exchange

oc xnalysis of the Sensex gain due to FII¶s investment

oc xnalysis of Sensex return due to the increase in number of FII

oc xnalysis of the correlation between sensex returns and FII µsnet

oc xnalysis of the trend in FII µs investment

Jhapter 6 : Findings, Jonclusion and Suggestions.

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

The earliest brokerage firms were established in Ñondon coffee houses,

FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

Team Hedge is a balanced mix of more than 15 years experience cutting

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FII͛s Influence On Sensex Over The Period 2000-2010c

Starting off as a land developer and builder in 1962, Thakkers group

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FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

Jurrency derivatives can be described as contracts between the sellers and

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FII͛s Influence On Sensex Over The Period 2000-2010c

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FII͛s Influence On Sensex Over The Period 2000-2010c

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