Impact of FII on Indian Stock Market

Abstract

Understanding the substantial influence of foreign institutional investors (FIIs) on the Indian stock market is crucial given the changing global scene. The Indian stock market is currently experiencing an increase in FIIs as very influential players, and the development of the Indian stock market depends on their growing contributions and involvement. Research on the connection between FIIs and the stock market needs to be done in light of the spectacular growth and increased volatility of the Indian stock markets. The aim of this study is to more FII dynamics and their impact on the Indian stock market. Assessment is done on data from the BSE Sensex, NSE Nifty, and FII activity from April 2012 to March 2023. The findings indicate that FII activity and its effect on the Indian stock market have a strong positive correlation. The era of unprecedented globalization has led to double-digit economic growth and intensified competition, driving a rapid pace of innovation. In response to this, Foreign Institutional Investment (FII) was introduced in 1991 as part of India's liberalization reform process under the Foreign Exchange Management Act (FEMA). Through present economic activities and the encouragement of foreign investment, this reform aimed to restore the economy. With awareness of the significance of capital as the basis of any economy, the flow of foreign capital has emerged as an essential indicator of economic development in both developed and developing nations. In this context, emerging economies like India's have gained popularity as preferred markets for foreign investors. This is attributed to substantial support from the government, trust in the financial system, and changes in the composition of capital flows into their economies as a result of the growth and integration of the world equity market. For analysis, we took data from NSDL year-wise data generated, and in that, there are 11 countries through which there is an inflow of Money in the Indian Stock Market in Both Equity and Debts Markets there are 10 countries. In eleven countries the name is of those countries from where Inflow is coming on a Frequent Basis.