Impact Of FII’s On Indian Capital Market

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1. INTRODUCTION
INDIAN STOCK MARKET:

Capital markets in India have been a reflection of the country's economic growth and development over the last two decades. Bombay Stock Exchange's sensitivity index, the Sensex, has become the barometer of the Indian market. Several reports have been published by leading international agencies on the potential scope of the Indian capital markets. India's growth story has important implications for the capital market, which has grown sharply with respect to several parameters — amounts raised number of stock exchanges and other intermediaries, listed stocks, market capitalization, trading volumes and turnover, market instruments, investor population, issuer and intermediary profiles. The capital market consists primarily of the debt and equity markets. Historically, it contributed significantly to mobilizing funds to meet public and private companies' financing requirements. The introduction of exchange-traded derivative instruments such as options and futures has enabled investors to better hedge their positions and reduce risks. SIGNIFICANCE OF CAPITAL MARKET The capital market and the need for the economy to grow at the projected over 8 per cent per annum, the managers of the Indian economy have been assiduously promoting the capital market as an engine of growth to provide an alternative yet efficient means of resource mobilization and allocation. The capital market acts as a brake on channeling savings to low- yielding enterprises and impels enterprises to focus on performance. It continuously monitors performance through movements of share prices in the market and the threats of takeover. This improves efficiency of resource utilization and thereby significantly increases returns on investment. As a result, savers and investors are not constrained by their individual abilities, but facilitated by the economy's capability to invest and save, which inevitably enhances savings and investment in the economy. Thus, the capital market converts a given stock of investible resources into a larger flow of goods and services and augments economic growth.

The capital market in India witnessed several policy initiatives since the year 2000, which further refined the market micro-structure, modernized operations and broadened investment choices for the investors. These developments in the securities market, which support corporate initiatives, finance the exploitation of new ideas and facilitate management of financial risks, hold out necessary momentum for growth, development and strength of the emerging market economy of India.
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Impact Of FII’s On Indian Capital Market

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The securities market has two interdependent and inseparable segments, the new issues (primary market) and the stock (secondary) market. The primary market provides the channel for sale of new securities while the secondary market deals in securities previously issued.

The primary market provides the channel for creation of new securities through issuance of financial instruments by public companies as well as Governments and Government agencies and bodies whereas the secondary market helps the holders of these financial instruments to sale for exiting from the investment. The price signals, which subsume all information about the issuer and his business including associated risk, generated in the secondary market, help the primary market in allocation of funds. The primary market issuance is done either through public issues or private placement. A public issue does not limit any entity in investing while in private placement, the issuance is done to select people.

Investors trade their holdings in response to changes in their assessment of risk and return in this market. They also sell securities for cash to meet their liquidity needs. The exchanges do not provide facility for spot trades in a strict sense. Closest to spot market is the cash market in exchanges where settlement takes place after some time. Trades taking place over a trading cycle (one day under rolling settlement) are settled together after a certain time. Reforms in the securities market, particularly the establishment and empowerment of SEBI, market determined allocation of resources, screen based nation-wide trading, de-materialization and electronic transfer of securities, rolling settlement and ban on deferral products, sophisticated risk management and derivatives trading, have greatly improved the regulatory framework and efficiency of trading and settlement. Indian market is now

comparable to many developed markets in terms of a number of qualitative parameters.

Foreign investor can invest in India through the following ways, they are

 Foreign direct investment(FDI)  Foreign institutional investment(FII)
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Impact Of FII’s On Indian Capital Market

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FDI: FDIs means an investment made by overseas investor to acquire lasting investing in a company or firm is called FDI. FDI is long term oriented in nature

FII: FIIs means an investment made by overseas investor in securities market. They don‘t have management power in the company they invest. FIIs are short term oriented in nature

FOREIGN INSTITUTIONAL INVESTORS

Foreign institutional investor means an entity established or incorporated outside India which proposes to make investment in India. Positive trends about the Indian economy combined with a fast-growing market have made India an attractive destination for foreign institutional investors. FII is defined as an institution organized outside of India for the purpose of making investments into the Indian securities market under the regulations prescribed by SEBI.

Who are FIIs

The following are said to be FIIs they are  Overseas pension funds,  mutual funds,  investment trust,  asset management company,  nominee company,  bank,  institutional portfolio manager,  university funds, endowments,
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Impact Of FII’s On Indian Capital Market

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 foundations,  charitable trusts,  charitable societies,  a trustee or power of attorney holder incorporated or established outside

Where do they invest?
The following financial instruments are available for FII investments  Securities in primary and secondary markets including shares, debentures and warrants of companies, unlisted, listed or to be listed on a recognized stock exchange in India;  Units of mutual funds;  Dated Government Securities;  Derivatives traded on a recognized stock exchange;  Commercial papers.

Eligibility criteria for applicant seeking FII registration
 As per Regulation 6 of SEBI (FII) Regulations,1995, Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration:  Applicant should have track record, professional competence, financial

soundness, experience, general reputation of fairness and integrity.  The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor.

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Impact Of FII’s On Indian Capital Market

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 The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.  Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment.  The applicant must be a "fit and proper" person.  The applicant has to appoint a local custodian and enter into an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions.  Payment of registration fee of US $ 10,000.00  "Form A" as prescribed in SEBI (FII) Regulations, 1995 is to be filled before applying for FII registration.

Important terms to know about FIIs:
 Sub-account : Sub-account includes those foreign corporations, foreign individuals, and institutions, funds or portfolios established or incorporated outside India on whose behalf investments are proposed to be made in India by a FII.  Designated Bank: Designated Bank means any bank in India which has been authorized by the Reserve Bank of India to act as a banker to FII.  Domestic Custodian: Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.
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the aggregate investment of all FIIs in an Indian company may not exceed twenty four percent (24%) of its total issued share capital.Impact Of FII’s On Indian Capital Market [Type text]  Broad Based Fund: Broad Based Fund means a fund established or incorporated outside India. FIIs‘ and their sub. other than in respect of derivative securities traded over a recognized exchange. Investment Restrictions Certain limitations apply to investments by FIIs into India. Foreign corporations and individuals are not eligible subaccounts of a FII that is registered as a debt fund. are required to invest at least seventy percent (70%) of their funds in equity and equity-related securities.  A FII registered as a debt fund. Provided that if the fund has institutional investor(s) it shall not be necessary for the fund to have twenty investors. the same sectoral limits which apply to foreign direct investment would continue to apply. must invest one hundred percent (100%) of its funds in debt instruments. on the other hand. and must effect transactions through a Sri Venkatesware College Of Engineering And Technology. FIIs are not permitted to engage in short selling. which has at least twenty investors with no single individual investor holding more than 10% shares or units of the fund.  FIIs may register with SEBI as a debt fund or an equity fund. First. Chittoor Page 6 . Even with board of director and shareholder approval. without the express approval of its board of directors and shareholders. FIIs which are registered as equity funds.accounts‘ investment in an Indian company can not exceed ten percent (10%) of the total issued share capital of the Indian company (five percent if the subaccount is a foreign corporation or individual). In addition.

FIIs and their impact on Indian Stock market It is influence of the FIIs which changed the face of the Indian stock markets. Sector investment prohibitions and caps which apply to foreign direct investment also apply to investments by FIIs. and FII investments must also comply with the pricing requirements applicable to foreign direct investment.Impact Of FII’s On Indian Capital Market [Type text] registered stock broker. Nature of Income Long-term capital gains Short-term capital gains Dividend Income Interest Income Tax Rate 10% 30% Nil 20% Long term capital gain: Capital gain on sale of securities held for a period of more than one year. FIIs are not permitted to invest in print media. It was FII which based the pressure on the rupee from the balance of payments position and lowered the cost of capital to Indian business.  Screen based trading and depository are realities today largely because of FIIs. TAXATION POLICIY ON FIIs The taxation norms available to FII are shown in the table below. Chittoor Page 7 .  Equity research was something unheard of in the Indian market a decade ago. Short term capital gain: Capital gain on sale of securities held for a period of less than one year. In addition. Sri Venkatesware College Of Engineering And Technology.

40 71.40 Debt 4.694.563. They were the first ones to identify the potential of Indian technology stocks.459.987.540. Thus. they exited the scripts and booked profits.083.563.80 -2.266.771.067.589.90 38.352.50 4.40 3.408.914.00 42. the activity in stocks used to be evenly attributed with little differences between volumes in specified and cash groups. FIIs have become the driving force behind the movements of the stock indices on the Indian stock markets. However since FIIs concentrate on the top 200 companies against the 6.486.153.20 47.40 Total 87.  FIIs are the trendsetters in any market.Impact Of FII’s On Indian Capital Market [Type text]  It is due to the FIIs that a concept like corporate governance is being increasingly adopted by Indian companies.00 46.30 4.987. this is benefiting domestic investors also.987.60 87.215.60 -41.20 41.000 listed companies on BSE.965.00 -5.30 36. Chittoor .30 83. Table showing the investment in Indian capital market by FIIs (from 2011-2012) FII Net Investments.20 133.518.2000-2012 (INR Crores) Year 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Equity 42.30 4.428.049.049.40 11.20 -52.80 30.60 39.90 9.80 179.663.80 40. Before the arrival of FIIs.841.674.181.40 42. When the rest of the investors invested in these scripts.10 35.50 80.714.80 Page 8 Sri Venkatesware College Of Engineering And Technology.424. the stock trading activity has concentrated to these liquid scripts making them less liquid scrip‘s totally illiquid.

90 grahp of FIIs invesment in india 200.000.00 Sri Venkatesware College Of Engineering And Technology.00 150.60 11.000.369.510.3 524.90 12.00 100.00 eauity 50. Chittoor Page 9 .000.90 48.4 141 3.00 -100.00 debt tatal 0.970.677.629.Impact Of FII’s On Indian Capital Market [Type text] 2002 2001 2000 3.80 6.000.00 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 -50.494.000.000.40 6.

promotion of depository and so on.  FIIs effects the return on investment for overseas investors in Indian banking system Sri Venkatesware College Of Engineering And Technology. BSE FMCG and BSE IT. Chittoor Page 10 . In the present project the scope of study is confined only on analyzing the impact of impact of FIIs on Indian capital market with reference to NSE. they are  FIIs effects the performance of stock markets  FIIs effects the exchange value of INR in forex markets  FII effects the capital formation of the firms. BSE and selected indices of BSE like BSE BANKEX. better the results. With the entry of foreign institutional investors tremendous changes have been taken place in the performance of Indian stock markets. It involves explaining the area of study carried out.Impact Of FII’s On Indian Capital Market [Type text] SCOPE OF THE STUDY: The scope of study is very important in the research process. FIIs changed the stock market approach in different way like introduction of screen based trading. The analysis is done for the time period of 01/04/2011 to 30/3/2012 NEED FOR THE STUDY: Indian economy had shown a rapid growth after globalization. The analysis is limited to equity market only. Better the scope of the study. The following factors encouraged taking the project.

they are  To find the relationship between FII equity investment pattern and BSE Sensex. Alternate Hypothesis (Ha): The various BSE indices and S&P CNX Nifty index rises with the increase in FIIs investment. S&P CNX Nifty and selected indices like BSE Bankex. BSE FMCG. This research project studies the relationship between FIIs investment and stock indices. Objectives of the Study The following are the objective of undertaking this study.Impact Of FII’s On Indian Capital Market [Type text] STATEMENT OF THE PROBLEM An adage says ―a problem well defined is half solved‖. BSE IT Sri Venkatesware College Of Engineering And Technology. The project deals with the ―Impact of Foreign Institutional Investors on Indian Stock Market‖. for this purpose we will develop two hypothesis they are Null Hypothesis (Ho): The various BSE indices and S&P CNX Nifty index does not rise with the increase in FIIs investment. The problem in the present project is to find whether there exist any impact of FIIs on Indian capital market or not. Chittoor Page 11 .

BSE. The data is collected from already existing sources. WEKIPEDIA. WWW.  To study the contribution of FII equity investment in shaping Indian capital market.IIFLCOM. so the data needed is secondary in nature for the present project.  To study the impact of activity of FII on volatility of BSE and NSE indices Research Methodology Research Type: As an exploratory study is conducted with an objective to gain familiarity with the phenomenon or to achieve new insight into it.COM.YAHOOANSWERS. WWW.NSE. WWW. Type Of Data Needed: The project requires the facts and figures of FIIs flow. WWW.SEBICOM. WWW. Data Sources: The data required is of mainly secondary in nature the sources include Website like WWW.COM etc Sri Venkatesware College Of Engineering And Technology. Chittoor Page 12 .COM.COM. this study aims to find the new insights in terms of finding the relationship between FII‘S and Indian Stock Indices. BSE and NSE index.Impact Of FII’s On Indian Capital Market [Type text]  To know the performance and trends of Indian stock market with regarding the FIIs flow. WWW.MONEYCONTROL.COM.

 Correlation: This analysis tool and its formulas measure the relationship between two data sets that are scaled to be independent of the unit of measurement.Impact Of FII’s On Indian Capital Market [Type text] Research Analysis Tools Graph tools like pie charts. and then use the results to predict the performance of a new. Chittoor Page 13 . We can apportion shares in the performance measure to each of these three factors. based on a set of performance data. statistical tools like Regression analysis and Correlation analysis are used. The population correlation calculation returns the covariance of two data sets divided by the product of their standard deviations. untested athlete. histograms and bar diagrams.  Regression Analysis: We can analyze how a single dependent variable is affected by the values of one or more independent variables — for example. how an athlete's performance is affected by such factors as age. and weight. height. We can use the Sri Venkatesware College Of Engineering And Technology.

The Sensex is compiled based on the performance of the stocks of 30 financially sound benchmark companies. The history of Indian stock market is almost the same as the history of BSE. The reason for such huge surge in the stock market was the liberal financial policies announced by the then financial minister Dr. also known as the big-bull of Indian stock market diverted huge funds from banks through fraudulent means. 3000 and 4000 figures in 1992. National Stock Exchange comes second to BSE in terms of popularity.Impact Of FII’s On Indian Capital Market [Type text] 2. BSE is the oldest stock market in India. Chittoor Page 14 . which we now know by the name Bombay Stock Exchange or BSE in short. In 1990 the BSE crossed the 1000 mark for the first time. BSE and NSE represent themselves as synonyms of Indian stock market. BSE got permanent recognition from the Government of India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association. Mehta. Profiles Industry profile: OVERVIEW OF INDIAN STOCK MARKET The working of stock exchanges in India started in 1875. It came to public knowledge that Mr. The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It crossed 2000. Man Mohan Singh. The 30 stock sensitive index or Sensex was first compiled in 1986. He played with 270 million Sri Venkatesware College Of Engineering And Technology. In 1965.

Many foreign institutional investors (FII) are investing in Indian stock markets on a very large scale. sub-brokers. Millions of small-scale investors became victims to the fraud as the Sensex fell flat shedding 570 points. during 2004 public elections unsuccessfully tried to ride on the market sentiments to power. The National Democratic Alliance led by BJP. India. Bharatiya Janatha Party‘s rise to power etc.‘ The factors that affected the market in the past were good monsoon. the Government formed The Securities and Exchange Board of India. says top officials of SEBI. Experts now believe the Sensex can soar past 14000 mark before 2010. This recent phenomenon Sri Venkatesware College Of Engineering And Technology. SEBI is the statutory body that controls and regulates the functioning of stock exchanges. The result of a cricket match between India and Pakistan also affected the movements in Indian stock market. Chittoor Page 15 . To prevent such frauds. brokers. The liberal economic policies pursued by successive Governments attracted foreign institutional investors to a large scale. portfolio managers‘ investment advisors etc. Global investors now ardently seek India as their preferred location for investment. Many Indians working in foreign countries now divert their savings to stocks.Impact Of FII’s On Indian Capital Market [Type text] shares of about 90 companies. after United States hosts the largest number of listed companies. The unpredictable behavior of the market gave it a tag – ‗a volatile market. stock market now appeals to middle class Indians also. Now with the inception of online trading and daily settlements the chances for a fraud is nil. NDA was voted out of power and the Sensex recorded the biggest fall in a day amidst fears that the Congress-Communist coalition would stall economic reforms. Sensex crossed the 5000 mark in 1999 and the 6000 mark in 2000. SEBI oblige several rigid measures to protect the interest of investors. Once viewed with skepticism. through an Act in 1992. The 7000 mark was crossed in June and the 8000 mark on September 8 in 2005. Later prime minister Man Mohan Singh‘s assurance of ‗reforms with a human face‘ cast off the fears and market reacted sharply to touch the highest ever mark of 8500.

Therefore. education. high demand) and very few people will want to sell this stock at current market price (i. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. A good monsoon means improved agricultural produce and more spending capacity among rural folk. The bullish run of the stock market can be associated with a steady growth of around 6% in GDP.e.The Origin Stock markets refer to a market place where investors can buy and sell stocks. The recent incidents that led to growing interest among Indian middle class are the initial public offers announced by Tata Consultancy Services.Impact Of FII’s On Indian Capital Market [Type text] is the result of opening up of online trading and diminished interest rates from banks. Maruti Udyog Limited. large potential of growth in the fields of telecommunication.e.e.e. mass media. Sri Venkatesware College Of Engineering And Technology. Ltd. They can buy or sell stock online after returning from their work places. The price at which each buying and selling transaction takes is determined by the market forces (i. The time factor also works for the NRIs. Good monsoons always raise the market sentiments. tourism and IT sectors backed by economic reforms ensure that Indian stock market continues its bull run. The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non Resident Indians. in the market. less supply). its price will fall down. Let us take an example for a better understanding of how market forces determine stock prices. ONGC and big names like that. buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Chittoor Page 16 . On the contrary. demand and supply for a particular stock. ABC Co. Ltd. More and more people would want to buy this stock (i. high supply and low demand) for the stock of ABC Co. the growth of Indian companies to MNCs. History of the Indian Stock Market . if there are more sellers than buyers (i. Ltd.

Bank of Bombay Share which had touched Rs. buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT. 87) ACHIEVEMENTS AND MILESTONES Pre-Independence Scenario . brokers used to gather at a street (now well known as "Dalai Street") for the purpose of transacting business. the Indian Stock Markets has a 200 years old history. most of the operations are done electronically and the stock markets have become almost paperless. business in its loan securities gained full momentum 1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. 1875 "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Sri Venkatesware College Of Engineering And Technology. and can trade freely from their home or office over the phone or through Internet. Trading list by the end of 1839 got broader 1840's Recognition from banks and merchants to about half a dozen brokers 1850's Rapid development of commercial enterprise saw brokerage business attracting more people into the business 1860's the number of brokers increased to 60 1860-61 The American Civil War broke out which caused a stoppage of cotton supply from United States of America.Impact Of FII’s On Indian Capital Market [Type text] In earlier times. marking the beginning of the "Share Mania" in India 1862-63 The number of brokers increased to about 200 to 250 1865 A disastrous slump began at the end of the American Civil War (as an example. 18th Century East India Company was the dominant institution and by end of the century. One of the oldest stock markets in Asia.Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business. Chittoor Page 17 . Now investors don‘t have to gather at the Exchanges. 2850 could only be sold at Rs.

1956.Impact Of FII’s On Indian Capital Market [Type text] 1880's Development of cotton mills industry and set up of many others 1894 Establishment of "The Ahmadabad Share and Stock Brokers' Association" 1880 . and later on merged with the Delhi Stock Exchange. number of brokers came down to 3 and the Exchange was closed down 1934 Establishment of the Lahore Stock Exchange 1936 Merger of the Lahore Stock Exchange with the Punjab Stock Exchange 1937 Re-organization and set up of the Madras Stock Exchange Limited (Pvt. Lahore Stock Exchange was closed down after the partition of India. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. The Exchanges that were recognized under the Act Sri Venkatesware College Of Engineering And Technology.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies 1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established 1944 Establishment of "The Hyderabad Stock Exchange Limited" 1947 "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" Post Independence Scenario The depression witnessed after the Independence led to closure of a lot of exchanges in the country. 1923 When recession followed. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act.90's Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal 1908 "The Calcutta Stock Exchange Association" was formed 1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. Chittoor Page 18 .

All the trading can be done on the Shares of Different companies whose values can be varied according to the Company Status and Liabilities. 1982)  Pune Stock Exchange Limited (1982)  Ludhiana Stock Exchange Association Limited (1983)  Gauhati Stock Exchange Limited (1984)  Kanara Stock Exchange Limited (at Mangalore. 10. 8. 5.Impact Of FII’s On Indian Capital Market [Type text] 1. namely:  Cochin Stock Exchange (1980)  Uttar Pradesh Stock Exchange Association Limited (at Kanpur. 3. Bangalore Bombay Calcutta Madras Delhi Indore Many more stock exchanges were established during 1980's. Bombay Calcutta Madras Ahmadabad Delhi Hyderabad 7. 2. 4. 9. 1985)  Magadh Stock Exchange Association (at Patna. Chittoor Page 19 . 6. 11. An Exchange is often the most important entity of the Stock Market.  Sri Venkatesware College Of Engineering And Technology. 12. 1986)  Jaipur Stock Exchange Limited (1989)  Bhubaneswar Stock Exchange Association Limited (1989)  Saurashtra Kutch Stock Exchange Limited (at Rajkot. 1989)  Vadodara Stock Exchange Limited (at Baroda. 1990)  Coimbatore Stock Exchange  Meerut Stock Exchange Stock exchange  A Stock Exchange is the place where "Trading operations" are performed which operates with the support of the Stock Brokers and Traders to trade on the Shares and Commodities.

Creating Investment opportunities for small investors. ROLE OF STOCK EXCHANGES: Stock Exchanges plays various roles and i have listed here some of the important roles: 1. 6.Sharing of the Profits. The securities traded on exchange include: -SHARES issued by companies.Impact Of FII’s On Indian Capital Market   [Type text] DESCRIPTION:These exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The initial offering of stocks and bonds is for the Investors.Governing the Corporate sector.This is to be done in the primary market and further the trading is done in the Secondary market.The Savings for investment are mobilized. NewYork Stock exchange Sri Venkatesware College Of Engineering And Technology. -UNIT TRUSTS and DERIVATIVES -Pooled Investments products and Bonds.Trade is done by the members on the exchange only. 3.Supporting the company's growth. Generally there is a central location for recordkeeping and it has connected with the electronic Networks which gives the speed and accuracy to the various transactions.Increasing the capital of the Businesses. To be cope up with trading. a security is present on the Stock Market that has to be listed there. 7.Barometer of the economy 8. 4. 2.                 MAJOR EXCHANGES OF THE WORLD: Following are some of the major exchanges of the World_  1.Raising the Government Economy. 5. Chittoor Page 20 .

They are divided into two categories: Types of Transactions Sri Venkatesware College Of Engineering And Technology. BSE 10. Tokyo Stock Exchange 3. Hong Kong Stock Exchange 9.Impact Of FII’s On Indian Capital Market           2. London Stock Exchange 6.Swiss Exchange [Type text] Along with them. NASDAQ 4. NSE 5. there are some of the regional Exchanges In different Countries but they are not so much popular for theStock Brokers and the Shareholders. Trading Pattern of The Indian Stock Market Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). Chittoor Page 21 . Shanghai Stock Exchange 7. Australian Securities Exchange 8.

Impact Of FII’s On Indian Capital Market [Type text] The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges: Indian stock exchange allows a member broker to perform following activities:  Act as an agent.  Buy and sell securities for his clients and charge commission for the same. COMPANY PROFILES: BOMBAY STOCK EXCHANGE (BSE) Sri Venkatesware College Of Engineering And Technology.  Act as a trader or dealer as a principal. Chittoor Page 22 . Buy and sell securities on his own account and risk.

Sundays and holidays declared by the Exchange in advance. when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall. making it the 6th largest stock exchange in Asia and the 14th largest in the world. Bombay) is a stock exchange located on Dalal Street. BSE and the National Stock Exchange of India account for the majority of the equity trading in India. While both have similar total market capitalization (about USD 1. The Stock Exchange. there are over 5. as the number of brokers constantly increased. giving the BSE a Sri Venkatesware College Of Engineering And Technology. History: The Bombay Stock Exchange is the oldest exchange in Asia. Though many other exchanges exist.133 listed Indian companies and over 8. The BSE SENSEX. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'.30 The hours of operation for the BSE quoted above are stated in terms the local time (GMT + 5:30).Contents Hours of operation Session Timing: 9. It traces its history to the 1850s. In 1956. As of March 2012. The equity market capitalization of the companies listed on the BSE was US$1 trillion as of December 2011. the Bombay Stock Exchange has a significant trading volume. BSE's normal trading sessions are on all days of the week except Saturday. The location of these meetings changed many times. also called "BSE 30". Mumbai and is the oldest stock exchange in Asia. the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. share volume in NSE is typically two times that of BSE.Impact Of FII’s On Indian Capital Market [Type text] the Bombay Stock Exchange (BSE) (Template: Lang-Marathi Bombay Śhare Bāzaār) (formerly. The BSE has the largest number of listed companies in the world. Chittoor Page 23 .6 trillion). The Bombay Stock Exchange developed the BSE SENSEX in 1986. is a widely used market index in India and Asia.15-15.196 scripts on the stock exchange.

 1986 SENSEX first compiled[6] using a market Capitalization-Weighted methodology for 30 component stocks representing well-established companies across key sectors.500 to 13.000 and closed at 13. Fort area.45 points or 0.000.  30 October 2006 The SENSEX on October 30. screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. Chittoor Page 24 . In 2000 the BSE used this index to open its derivatives market.26 points. up 117. the Bombay Stock Exchange switched to an electronic trading system in 1995.[5] The BSE is currently housed in Phiroze Jeejeebhoy Towers at Dalal Street.000 to 13. 2006 crossed the magical figure of 13. Milestones Following is the milestones of the SENSEX through Indian stock market history. Sri Venkatesware College Of Engineering And Technology.co.  1830's Business on corporate stocks and shares in Bank and Cotton presses started in Mumbai.in to enable investors anywhere in the world to trade on the BSE platform.000 and 123 days to move from 12. It took the exchange only fifty days to make this transition.90's Sharp increase in share prices of jute industries followed by a boom in tea stocks and coal  1978-79 Base year of SENSEX. The BSE has also introduced the world's first centralized exchange-based internet trading system.9%. expanding the BSE's trading platform. Historically an open outcry floor trading exchange. The development of SENSEX options along with equity derivatives followed in 2001 and 2002. defined to be 100. It took 135 days for the SENSEX to move from 12.Impact Of FII’s On Indian Capital Market [Type text] means to measure overall performance of the exchange.024. This automated. BSEWEBx.  1870 . trading SENSEX futures contracts.  1860-1865 Cotton price bubble as a result of the American Civil War.

.  9 October 2007 The BSE SENSEX crossed the 18. The SENSEX ended with a gain of 22 points at 16.000 mark on the back of aggressive buying by funds ahead of the US Federal Reserve meeting. The NSE Nifty gained 186 points to close at 4.000 points in just four trading days. The 30-share index spurted in the last five minutes of trade to fly-past the crucial level and scaled a new intra-day peak at 20. HDFC Bank and SBI among others.000-mark on October 15.67. a gain of 734.005 points in afternoon trade.887 . capital goods and refinery sectors.  29 October 2007 The SENSEX crossed the 20.  The SENSEX finally ended with a gain of 654 points at 16. The index zoomed to a new all-time intra-day high of 18.down 187 points from the day's high. Reliance Industries.000 mark.977.000-mark on October 9. It finally gained 789 points to close at an all-time high of 18.000 points from the 17.280. as well as the largest intra-day gains of 993 points in absolute term backed by frenzied buying after the news of the UPA and Left meeting on October 22 put an end to the worries of an impending election. The index gained the last 1. and finally ended with a smart gain of 640 points at 19.87 points before ending at its fresh closing high of 19. It took seven months for the SENSEX to move from 14.50 Sri Venkatesware College Of Engineering And Technology. The index took only 10 trading days to gain 1.000 to touch 15.096.Impact Of FII’s On Indian Capital Market [Type text]  6 July 2007 The SENSEX on July 6.000-mark backed by revival of funds-based buying in blue chip stocks in metal. The market set several new records including the biggest single day gain of 789 points at close.024. Within minutes after trading began. Chittoor Page 25 .The Nifty gained 242 points to close at 5.732.  15 October 2007 The SENSEX crossed the 19. It took just 8 days to cross 18.000 points after the index crossed the 19. ICICI Bank.327. Some profit taking towards the end saw the index slip into red to 16.  26 September 2007 The SENSEX scaled yet another height during early morning trade on September 26.670. The index touched a fresh all-time intra-day high of 19.059. 2007 crossed the magical figure of 15. the SENSEX crossed the 17.921. The major drivers of today's rally were index heavyweights Larsen and Toubro.000 points.000 to 15.000-mark. 2007.323. 2007.

51 points down from the previous day having seen an intraday fall of as large as 1063 points. Chittoor Page 26 . However. showing a hefty gain of 203. Thus. This was backed by high market confidence of increased FII investment and strong corporate results for the third quarter.96).000 mark in intra-day trading after 49 trading sessions.50 points before ending at 5. this week turned out to be the week with largest percentage fall in the SENSEX  19 October 2010 BSE introduced the 15-minute special pre-open trading session.  6 October 2008 The SENSEX closed at 11801. The mechanism.220 amidst a negative sentiment generated on the Reserve Bank of India hiking CRR by 50 bps. The NSE Nifty rose to a record high 5. BSE indices MIDCAP SMLCAP BSE-100 BSE-200 BSE-500 Sri Venkatesware College Of Engineering And Technology.028.  8 January 2008 The SENSEX peaks. lasted for 15 minutes (from 9:00-9:15 am)  5 November 2010 BSE SENSEX crossed the 21000 mark (exactly 21004. then pulled back and ended up at 14. 800. It crossed the 21. it later fell back due to profit booking. a mechanism under which investors can bid for stocks before the market opens. FII outflow continued in this week.922.60 points.731 during the early trades.Impact Of FII’s On Indian Capital Market [Type text] points.  25 June 2008 The SENSEX touched an intra day low of 13.70 hitting the lowest in the past 2 years.905.90.  27 December 2010 BSE SENSEX is at 20.93. known as 'pre-open session call auction'.  10 October 2008 The SENSEX today closed at 10527.

Sri Venkatesware College Of Engineering And Technology.Impact Of FII’s On Indian Capital Market [Type text] BSE-GREENEX DOLLEX BANKEX POWER CD CG AUTO PSU REALTY METAL FMCG TECk IT HC OIL&GAS Awards  The World Council of Corporate Governance has awarded the Golden Peacock Global CSR Award for BSE's initiatives in Corporate Social Responsibility (CSR). Chittoor Page 27 .

NSE is mutually owned by a set of leading financial institutions. cover more than 1500 cities across India. health management at work and excellence in HR through technology. banks.Pacific HRM awards for its efforts in employer branding through talent management at work. 2006 and March 31. the NSE VSAT terminals.[6] NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. and between them are responsible for the vast majority of share transactions.[8] Sri Venkatesware College Of Engineering And Technology. an index of fifty major stocks weighted by market capitalization.  The Human Resource Management at BSE has won the Asia .  It has been cited as one of the world's best performing stock market by Reuters.6%. 2799 in total.[3] Though a number of other exchanges exist. The NSE's key index is the S&P CNX Nifty. for both equities and derivative trading.Finance Learners NATIONAL STOCK EXCHANGE OF INDIA (NSE) The National Stock Exchange (NSE) (Hindi Rashtriya Śhare Bāzaār) is a stock exchange located at Mumbai.[5] As of 2006. Chittoor Page 28 . Bombay Stock Exchange .[2] NSE has a market capitalization of around US$985 billion and over 1. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India. 2007 have been awarded the ICAI awards for excellence in financial reporting. insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities.Impact Of FII’s On Indian Capital Market [Type text]  The Annual Reports and Accounts of BSE for the year ended March 31. known as the NSE NIFTY (National Stock Exchange Fifty). India.646 listings as of December 2011. It is the 16th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades.[7] It is the second fastest growing stock exchange in the world with a recorded growth of 16.[4] There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE.

exactly one year after the launch of Currency Futures. Chittoor Page 29 . NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. while operations in the Derivatives segment commenced in June 2000. Markets Currently. NSE has the following major segments of the capital market: Equity Futures and options Retail debt market Wholesale debt market Currency futures Mutual fund Stocks lending and borrowing In August 2008 currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. 1956.Impact Of FII’s On Indian Capital Market [Type text] Origins The National Stock Exchange of India was set up by Government of India on the recommendation of Pherwani Committee in 1991. it was recognized as a stock exchange under the Securities Contracts (Regulation) Act.Promoted by leading Financial institutions essentially led by IDBI at the behest of the Government of India. it was incorporated in November 1992 as a tax-paying company. Currently it has also launched currency futures in Euros. The Capital market (Equities) segment of the NSE commenced operations in November 1994. Interest Rate Futures were introduced for the first time in India by NSE on 31 August 2009. pounds and yen. In April 1993. Sri Venkatesware College Of Engineering And Technology.

a futures contract based on 7% 10 Year Government of India (Notional) was launched with quarterly maturities. As recommended by SEBI-RBI committee. a mechanism under which investors can bid for stocks before the market opens. on 31 August 2009. Chittoor Page 30 .Impact Of FII’s On Indian Capital Market [Type text] NSE became the first stock exchange to get approval for interest rate futures.nse. Graph of S&P CNX Nifty from January 1997 to March 2011 Indices Sri Venkatesware College Of Engineering And Technology. 9:15 AM TO 3:15(3:30) Mile Stones  November 1992 Incorporation  April 1993 Recognition as a stock exchange  June 1994 Wholesale Debt Market segment goes live  November 1994 Capital Market (Equities) segment goes live  July 1995 Establishment of Investor Protection Fund  October 1995 Became largest stock exchange in the country  December 1996 Launch of CNX Nifty Junior  May 1998 Launch of NSE's Web-site: www.in  July 1998 Launch of NSE's Certification Programme in Financial Market  February 2000 Commencement of Internet Trading  June 2000 Commencement of Derivatives Trading  July 2001 Commencement of trading in Options on Individual Securities  January 2003 Commencement of trading in Retail Debt Market  June 2003 Launch of Interest Rate Futures  August 2003 Launch of Futures & options in CNXIT Index  June 2007 NSE launches derivatives on Nifty Junior & CNX 100  October 2007 NSE launches derivatives on Nifty Midcap 50  October 2010 Launch of 15-minute special pre-open trading session. NSE's normal trading sessions.co.

has been offering a short-term course called NSE Certified Capital Market Professional (NCCMP) since August 2009. the list of the various modules can be found at the following official site of NSE India. both at beginner and advanced levels. including:[11] S&P CNX Nifty (Standard & Poor's CRISIL NSE Index) CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200) Certifications NSE also conducts online examination and awards certification. certifications are available in 32 modules. covering different sectors of financial and capital markets.Impact Of FII’s On Indian Capital Market [Type text] NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices. Currently. NSE. Chittoor Page 31 . in collaboration with reputed colleges and institutes in India. in the campuses of the respective colleges/ institutes Sri Venkatesware College Of Engineering And Technology. [2] Branches of the NSE are located throughout India. under its programmes of NSE's Certification in Financial Markets (NCFM)[1].

However. etc. the correlation between returns and flows reduces during bull markets as other market participants raise their involvement reducing the influence of FIIs. Sri Venkatesware College Of Engineering And Technology. Stanley Morgan (2002) has examined that FIIs have played a very important role in building up India‘s forex reserves. The study found that in the pre-Asian crisis period any change in FII found to have a positive impact on the equity returns. which have enabled a host of economic reforms. But there was not much effect on the equity returns. 2. Secondly. Chittoor Page 32 . Hence. inflation. Chakrabarti (2001) has examined in his research that following the Asian crisis and the bust of info-tech bubble internationally in 1998-99 the net FII has declined by US$ 61 million. has marked a regime shift in the determinants of FII after Asian crisis. Research by Morgan Stanley shows that the correlation between foreign inflows and market returns is high during bear and weakens with strengthening equity prices due to increased participation by other players. FIIs are now important investors in the country‘s economic growth despite sluggish domestic sentiment. But in the post-Asian crisis period it was found the reverse relation that change in FII is mainly due to change in equity returns. it also briefly analyses the nature of FII flows based on research. The Morgan Stanley report notes that FII strongly influence short-term market movements during bear markets. LITERATURE REVIEW: 1. This negative investment would possibly disturb the long-term relationship between FII and the other variables like equity returns. any empirical exercise on FII has to take care of this fact. 3. Sivakumar S (2003) has analyzed the net flows of foreign institutional investment over the years.Impact Of FII’s On Indian Capital Market [Type text] 3.

Rai Kulwant et al (2003) held that the present study tries to examine the determinants of Foreign Institutional Investments in India. 4. This study did not find any causation running from FII inflow to stock returns as it was found by some studies. Stabilizing the stock market volatility and minimizing the ex-ante risk would help in attracting more FII inflow that has positive impact on the real economy. Hence. Data Analysis and Interpretation Sri Venkatesware College Of Engineering And Technology. by using monthly data.. the impact of stock market returns and the ex-ante risk turned out to be major determinants of FII inflow. inflation rate (both domestic and foreign) and ex-ante risk. In this study.Impact Of FII’s On Indian Capital Market [Type text] explores some determinants of FII flows and examines if the overall experience has been stabilizing or destabilizing for the Indian capital market. i. Chakrabarti et al (2003) have found in their research that the equity return has a significant and positive impact on the FII. In terms of magnitude. 5. 4. which have crossed almost US$ 12 billions by the end of 2002. foreign investors could play a role of market makers and book their profits. But given the huge volume of investments. there is a possibility of bi-directional relationship between FII and the equity returns. Agarwal. we found that FII inflow depends on stock market returns. Given the huge volume of these flows and its impact on the other domestic financial markets understanding the behavior of these flows becomes very important at the time of liberalizing capital account.e. they can buy financial assets when the prices are declining thereby jacking-up the asset prices and sell when the asset prices are increasing. Chittoor Page 33 .

Impact Of FII’s On Indian Capital Market [Type text] Sri Venkatesware College Of Engineering And Technology. Chittoor Page 34 .

Impact Of FII’s On Indian Capital Market [Type text] Sri Venkatesware College Of Engineering And Technology. Chittoor Page 35 .

Chittoor Page 36 .Impact Of FII’s On Indian Capital Market [Type text] Sri Venkatesware College Of Engineering And Technology.

009459x Page 37 Sri Venkatesware College Of Engineering And Technology.304052563 0.248844157 0.62006164 standard error regression equation 330.223445284 0.75011 y=-149.0357 y=2067.028639928x 144.157395+0.359+0.615205 y=7618.4074845 y=-303.Impact Of FII’s On Indian Capital Market [Type text] Table showing the details of results particulars NSE BSE BSE Bankex BSE FMCG correlation 0.636+0. Chittoor .021765x 1082.007028x 1145.441+0.

441+0. The dependent variable (NSE) index can be calculated by using the following regression equation. Y=2067. Chittoor Page 38 .012516159x RESULTS The following inferences are drawn from the above data analysis they are 1. The correlation between FIIs flows and BSE Index is only 0. FIIs vs.0367 which is very high and it represents the deviations from the mean value calculate.007028X-Standard error 2.Impact Of FII’s On Indian Capital Market [Type text] BSE IT 0. BSE.33862846 419. FIIs vs.223446 which is a week correlation and have some impact on the movement of BSE index and is not influencing much.73992816+0. FIIs are not influencing the nifty movement very much The standard error comes out to be330.523 which is very high and it represents the deviations from the mean value calculate The dependent variable (NSE) index can be calculated by using the following regression equation Sri Venkatesware College Of Engineering And Technology. NSE The correlation between FIIs and NSE is only 0. The standard error comes out to be1146.6329817 y=90.2466 which is very week and this shows that FIIs do have impact on the nifty movement but it is not significant.

The correlation stands at 0. BSE Bankex The correlation between FIIs and BSE Bankex is some what better than two index and is positive in nature and can have a influence ability on the movement of BSE Bankex index. The correlation stands at 0.157395+0.standard error 3.4074845 which is very low and it represents the deviations from the mean value calculate.standard error 4.009459x.Impact Of FII’s On Indian Capital Market [Type text] Y=7618.75011 which is very high and it represents the deviations from the mean value calculate. FIIs vs.028639928x.021765x. FIIs vs.636+0. BSE IT The correlation between FIIs and BSE IT is significant and is positive in nature and can have a influence ability on the movement of BSE IT index. The dependent variable (BSE Bankex) index can be calculated by using the following regression equation y=-149. Chittoor Page 39 .standard error 5.62006164 The standard error comes out to be 144. The dependent variable (BSE FMCG) index can be calculated by using the following regression equation y=-303.359+0.304052563 The standard error comes out to be 1082.33862846 Sri Venkatesware College Of Engineering And Technology. BSE FMCG The correlation between FIIs and BSE Bankex is very strong and is positive in nature and can have a more influence ability on the movement of BSE Bankex index. FIIs vs. The correlation stands at 0.

Findings: Sri Venkatesware College Of Engineering And Technology. BSE and various Indices:  FIIs do not have significant impact on the movement of NSE snd BSE index and this is due to following reasons  Global economical changes  RBI Credit policy  Growth rate of other developed and developing counties stock markets  Forex value of INR  FIIs have significant impact on the movement of specific BSE Indices like BSE FMCG and this is due to following reasons  Strong earnings ability of FMCG firms  Less level of competitions  Continuous upward movement of stocks of FMCG Co. The dependent variable (BSE IT) index can be calculated by using the following regression equation y=90. Chittoor Page 40 .  Fiis have positive significant on the movement of specific indices like BSE Bankex and BSE IT  India is very strong in Banking and Financial system  The growth rate of banking industry is good  India is one of the major exporter of IT and BPO services to the world market  The software sector is provided by skilled labor at lower cost.Impact Of FII’s On Indian Capital Market [Type text] The standard error comes out to be 419.012516159x.73992816+0.6329817 which is very high and it represents the deviations from the mean value calculate.standard error Reasons for the existence of different type of correlation between FIIs VS NSE.

39 -6.22 -10.Impact Of FII’s On Indian Capital Market [Type text] Table showing the changes of FIIs and indexes (in %) particulars FIIs NSE BSE BSE BANKEX BSE FMCG BSE IT 1/4/2011 30/03/2012 451216 5826 19420 13169 3612 6517 488346 5295 17404 11751 4493 6081 changes in % 8.38% and 10.22 -10.22% from the 451216 to 488346.38 -10. lower IIP growth act.  NSE and BSE index closed at negative by loosing 10.22% respectively this is due the worsening of world economy. This is because of strong growth rate of GDP when compared to other countries.  BSE Bankex also posted negative returns of 10.76% by decreasing from 13169 to 11751. Chittoor Page 41 .76 24. along with some other internal problems.69 From the above table we can draw some interesting facts they are  FIIs closed in a positive at the end by raising 8. FIIs are investing in Indian capital markets because of lack of better investment chances. which indicates that the FIIs are positive in Indian capital markets. raise in inflation level.  In spite of negative performance of Indian markets. This is due to failure of banking and financial system in other countries Sri Venkatesware College Of Engineering And Technology.

69% but it is minimum when compared with other index for the same period. CONCLUSION Sri Venkatesware College Of Engineering And Technology. this is due to the strong growth of Indian IT sector and also the decreasing of rupee value with USD also encouraged the investment into this sector.Impact Of FII’s On Indian Capital Market [Type text] and downgrading of banking institutions by international credit rating agencies both in India and world wide.  BSE FMCG has posted a huge rise in index and gave positive returns of 24%.  BSE IT index also posted negative returns of 6. FMCG is most attracting investment opportunity for FIIs and domestic investors. The sector is ever green and rewarding one. Chittoor Page 42 . 5.

 Secondary data that I have used in this study may not give true picture of the concern. The data on daily basis can give more positive results. The data on daily basis can give more positive results (may be). inflation. showed high positive correlation with FII. The data was taken on weekly basis. Also the coefficient of determination is less in all the case. etc. There is a positive correlation between stock indices and FIIs but FIIs didn‘t have any significant impact on Indian Stock Market. Also FII is not the only factor affecting the stock indices. According to Data analysis and findings. This does not mean that there is no relation between them. LIMITATIONS Besides following scientific methodologies the study has come across some limitations. bullion market. budgets.  The data taken for study may not give the clear picture for analysis of impact of FIIs on Indian capital market Sri Venkatesware College Of Engineering And Technology.Impact Of FII’s On Indian Capital Market [Type text] In developing countries like India foreign capital helps in increasing the productivity of labor and to build up foreign exchange reserves to meet the current account deficit. Foreign Investment provides a channel through which country can have access to foreign capital. Chittoor Page 43 . BSE FMCG. my project report is not fully exhaustive. One of the reasons for absence of any linear relation can also be due to the sample data. do also have an impact on the Indian stock market. The null hypothesis is rejected. economical and political condition.  The data is taken on weekly basis. BSE IT and BSE Bankex have also significant positive correlation with FIIs but rest of the index like NSE and BSE showed very less positive correlation with FII. It shows the absence of linear relation between FII and stock index.  Due to time constraint. There are other major factors that influence the bourses in the stock market. it can be concluded that FII do have significant impact on the Indian Stock Market but there are other factors like government policies.

an array of services can help promote foreign institutional investment in India. One such measure in this line could be the newly announced INDONEXT. which would result in strengthening the economy as a whole. Chittoor Page 44 .Impact Of FII’s On Indian Capital Market [Type text] SUGGESTIONS AND RECOMENDATIONS Some of the steps that can be taken to help influence the choices made by foreign institutional investors include:  The Government should cut its fiscal deficits.  The FIIs investments.  The ability of governments to prevent or reduce financial crises also has a great impact on the growth of capital flows. ranging from basic services such as the provision of electricity and clean water. which might bring some focus on these companies and hopefully add Sri Venkatesware College Of Engineering And Technology. As described earlier. the platform for trading the small and mid-cap companies.  The Banking system needs to be strengthened which could be achieved by reducing the number of Non Performing Assets. to fair and effective dispute resolution systems. Steps to address these crises include strengthening banking supervision.  An attempt should be made to bring down the inflation level to attract more foreign institutional investments into India. though shown an increasing trend over time. requiring more transparency in international financial transactions and ensuring adequate supervision and regulation of financial markets. are still far below the permissible limits.  Creating infrastructure and other facilities to attract foreign investment.

In order to attract portfolio investments which prefer liquidity. to ensure that rules are adhered to and that arbitration may be established by mutual consent.  There has been a significant shift in the character of global capital flows to the developing countries in recent years in that the predominance of private account capital transfer and especially portfolio investments (FPI) increased considerably.  Michael Mossback and Mohammad Najand of Old Dominion University (2000): ―Are the structural changes in MF investing. domestic content requirements. which may attract some further investments in them by FIIs. it has been advocated to develop stock markets. BIBLIOGRAPHY References for articles:  Bose Suchismita and Coondoo Dipaankar (2005): ―The Impact of FII Regulations in India‖.  The fact is that developing country like India has its own compulsions arising out of the very state of their social.Impact Of FII’s On Indian Capital Market [Type text] some liquidity and volume to their trading. driving the US stock markets to its Sri Venkatesware College Of Engineering And Technology. political and economic development. Journal: Journal of foreign institution investments Vol 27. etc with the intention of protecting domestic industries from international competition and promoting their economic development. Journal: International Journal of financial market trends. Chittoor Page 45 .  The provision for clear procedures must be followed in the event of disputes between investors and host governments. To attract portfolio investments and retain their confidence.  Countries may impose these kinds of measures like expropriation. the host countries have to follow stable macro-economic policies. but this usually leads to misallocation of resources away from the natural economic capabilities of nations. Vol 30. Publisher: SSRN Group Publishing Limited. restrictions on capital outflows of short term investments. Publisher: MCB UP Ltd  Chakrabarti (2001).

com/sol3/papers. Vol: 25. Journal : Journal of stock market volatility .ssrn.com  www.nseindia. Chittoor Page 46 .sebi.pdf  http://www. Journal: International Journal of bull and bear pulls. Publisher: MCB UP Ltd.com/Fii-Newsstockmarket. Publisher: MCB UP Ltd. Publisher: Emerald Group Publishing Limited  Sivakumar S (October 2003) : ―FIIs: Bane or boon?‖ .com  www. Vol: 34.Impact Of FII’s On Indian Capital Market [Type text] current levels‖. Vol: 25. Vol 17. Publisher: MCB UP Ltd.sagepub. References from web links:  http://stockstalks.gov.moneycontrol.com/stocktalksforums/index.bseindia. Publisher: MCB UP Ltd.com/uploads  www.sebi.org.  Richard W.Sias of Washington State University (1996) : ―Price pressure and the role of substitutional investors in closed-end funds‖ .  Sikdar Soumyen (2006) : ―Foreign Capital Inflow into India: Determinants and Management‖.rbi.cfm  http://www.org  www. Vol: 28.in/workingpaper/stock. Journal: Journal of Institutional Investors .com References from Journals: Sri Venkatesware College Of Engineering And Technology.sharetipsinfo.  wWw. Journal: Journal of ICFAI. Journal: International Journal of foreign money supply Management.html  http://mar.php  http://www.  Sandhya Ananthanarayanan of Nanyang Technological University (2004) : ―Foreign Institutional Investors and Security Returns: Evidence from Indian Stock Exchanges‖.joaag.com/cgi/content/abstract/2/3/287  http://papers.

BSE. BSE FMCG. BSE Bankex. Chittoor . BSE IT Date 1/4/2011 (X) FIIs flows(in cr) 451216 NSE index 5826 BSE index 19420 BSE Bankex index 13169 BSE FMCG index 3612 BSE IT index 6517 Page 47 Sri Venkatesware College Of Engineering And Technology.Impact Of FII’s On Indian Capital Market [Type text]  Economic Political Weekly  ICFAI Journals  Magazines and Newspapers:  Economic times Annuxure Data related to FIIs flow and the closing index value of NSE.

Impact Of FII’s On Indian Capital Market [Type text] 8/4/2011 15/4/2011 21/4/2011 29/4/2011 6/5/2011 13/5/2011 20/5/2011 27/5/2011 3/6/2011 10/6/2011 17/6/2011 24/7/2011 1/7/2011 8/7/2011 15/7/2011 451352 451438 453359 451816 449058 448419 444204 444830 447304 447775 446300 445200 445380 455528 456359 (X) FIIs flows(in cr) 456556 457804 5842 5824 5884 5749 5551 5544 5486 5476 5516 5485 5366 5471 5627 5660 5581 NSE index 5633 5482 19451 19386 19602 19135 18518 18531 18326 18266 18376 18268 17870 18240 18762 18858 18561 BSE index 18722 18197 13299 13382 13545 13076 12670 12590 12158 12220 12309 12225 12091 12393 12853 12940 12846 BSE Bankex index 12908 12447 3637 3713 3730 3755 3642 3803 3762 3777 3883 3861 3854 3883 4048 4040 4039 BSE FMCG index 4095 4093 6557 6258 6210 6144 6056 6039 6063 5950 6003 6093 5815 5991 6258 6199 5856 BSE IT index 5932 5835 Date 22/7/2011 29/7/2011 Sri Venkatesware College Of Engineering And Technology. Chittoor Page 48 .

Impact Of FII’s On Indian Capital Market [Type text] 5/8/2011 12/8/2011 19/8/2011 26/8/2011 2/9/2011 9/9/2011 16/9/2011 23/9/2011 30/9/2011 7/10/2011 14/10/2011 21/10/2011 28/10/2011 4/11/2011 456312 451975 450923 446582 447649 450011 448800 448668 446812 443784 446055 445708 446129 449276 5211 5072 4845 4747 5040 5059 5084 4867 4943 4888 5132 5049 5360 5284 17305 16839 16141 15848 16821 16866 16933 16162 16453 16232 17082 16785 17804 17562 11833 11636 10763 10245 10949 11097 11127 10760 10850 10347 11064 11094 11382 11302 3913 3908 3898 3892 3995 3960 3933 3831 3910 3900 3991 3966 4153 4183 5222 5004 4738 4719 4995 4950 5107 4985 5275 5241 5698 5525 5830 5762 5744 11/11/2011 450417 (X) FIIs flows(in cr) 449846 445450 5168 NSE index 4905 4710 17192 BSE index 16371 15695 10686 BSE Bankex index 10161 9768 4234 BSE FMCG index 4075 3899 BSE IT index 5614 5403 Page 49 Date 18/11/2011 25/11/2011 Sri Venkatesware College Of Engineering And Technology. Chittoor .

Chittoor Page 50 .Impact Of FII’s On Indian Capital Market [Type text] 2/12/2011 9/12/2011 16/12/2011 23/12/2011 30/12/2011 6/1/2012 13/1/2012 20/1/2012 27/1/2012 3/2/2012 10/2/212 17/2/2012 24/2/2012 2/3/2012 9/3/2012 16/3/2012 23/3/2012 30/3/2012 445336 446535 445152 444047 444390 445396 446862 450394 453463 459620 464291 468614 472047 480886 481217 487124 489076 488346 5050 4866 4651 4714 4624 4854 4866 5048 5204 5325 5384 5564 5429 5359 5333 5317 5278 5295 16846 16213 15491 15738 15454 15867 16154 16739 17233 17604 17745 18289 19723 17636 17503 17466 17361 17404 10550 10157 9420 9529 9153 9736 10300 10912 11282 11643 11986 12736 12068 11996 12086 11969 11860 11751 4111 3989 3961 4088 4035 4032 4071 4035 4063 4120 4130 4153 4190 4130 4164 4284 4403 4493 5726 5733 5712 5675 5751 5878 5482 5499 5721 5912 6050 6266 6309 6103 6132 6069 6024 6081 Sri Venkatesware College Of Engineering And Technology.

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