Do FIIs Truly Influence Emerging Stock Market of India?

Abstract

The emerging markets have more potential to grow but less capacity to make capital formation therefore these markets also look at developed markets in order to attract capital for its business activities. The FIIs have appeared as remarkable players in the Indian stock market and their rising contribution appends development of stock market in India. Indian stock market has reached novel heights and became more volatile. Continuous evidences are obtained by researchers indicating the volatility shifts on the stock market due to the behavior of FIIs. Therefore the main objective of present study is to examine the impact of FPIs/FIIs flow on Indian stock market. The present study has taken daily observations of FPIs/FIIs (Net Purchase/Sale= Gross Purchase-Gross Sales) in Indian stock market and S&P BSE Sensex index from April 2004 to March 2015. The volatility in the movement of foreign institutional investors ' funds is too high. The Results obtained through other econometrics tools are reasonably fascinating and may have a striking effect on the strategies of domestic and international investors before investing in Indian stock market .