Impact of FII On Indian EconomyStock Market
Impact of FII On Indian EconomyStock Market
Impact of FII On Indian EconomyStock Market
ISSN No:-2456-2165
Abstract:- The prosperity and success of a country are different techniques to minimize the risk involved. Foreign
represented by the measures of its continuous growth of the institutional investors calculate profits in international
economy, which is fueled by investment. Foreign reserves, currencies. Hence currency changeover rates attract an
government revenue, exports as well as the quantity and additional foreign exchange risk on foreign investments. High
nature of foreign investment are all very crucial for a volume investments demand heavy-duty analysis behind the
nation's well-being. The FIIs have recently risen as scene. However, rudimentary techniques like diversification,
significant stakeholders in the capital market of India. They and analysis of systematic measurement parameters, like beta,
are increasingly becoming one of the primary elements β (a measure of volatility, against a benchmark, like NIFTY50
contributing to the expansion of financial markets, or SENSEX) & alpha, α (excess return on the investment, after
particularly in developing nations like India. Through this accounting for market volatilities) to make the best use of the
paper, our foremost goal was to analyze the affect of dynamic security market line still hold their ground.
Foreing institutional investors on the equity market from
the period 2011 to 2021. We have used various tests to study SEBI defines "foreign institutional investors" as an
the effect. The study's findings suggested that FII organisation based out of India, which wants to invest in
investment and Nifty50 were highly influenced by the securities in India. Foreign Institutional Investor are
COVID-19 pandemic, which occurred during the period local/domestic portfolio management company or domestic
under study. asset manager that handles assets collected, imported from out
of India for investing in India on behalf of a sub-account. The
Problem Statement term, ‘Foreign Institutional Investor’ is commonly used to
Attracted by the potential in India’s primary and describe the firms incorporated outside of India which invest in
secondary markets, FIIs have invested approximately Rs. India's financial markets, they do it after registering with
31,498 crore (around US$ 4.3 billion) in 2021-22 (Jain & Nair, Securities & Exchange Board of India (SEBI).
n.d.) and became one of the largest drivers of the financial
markets of India. In this paper, we will be analyzing how FIIs Investments from Foreign Investments are mainly done in
influence the Indian Stock Market and will be covering the the financial markets and are typically short-term (GARG &
effect of major events on their investing decisions. BODLA, 2011). Several researchers have attempted to
establish correlations between foreign investment flows and the
I. INTRODUCTION market behaviour.
Fig 1: Net Monthly FII Flow (2011-2021) The following time series plots of change in NIFTY50 and
Foreign institutional investments show some correlation as both
the graphs appear to overlap and move together.
Table 1: 10 Year correlation and Volatility analysis Table 2: Post covid correlation and Volatility analysis
Jan11-Dec21 Nifty 50 FII Flow Jan21-Dec21 Nifty 50 FII Flow
Nifty 50 1 Nifty 50 1
FII Flow 0.6218352363 1 FII Flow 0.4485742087 1
According to correlation analysis, the Nifty50 movement Post covid high volatility is due to trust shown by foreign
was 62.2 percent dependent on FII Flow over a decade. investors in the Indian economy even though it hit rock bottom
during the first wave. A total of $37.68 Billion was invested in
the financial year 20-21.
Table 6
Standard Error P-value Coefficients t Stat
Intercept 34.09373375 0.7290712831 -11.83441374 -0.3471140424
X Variable 1 0.002186866553 0 0.01972189168 9.018333404
Table 7-8: Regression analysis test results on data during covid (Jan’20-Dec’20)
Regression Statistics
Standard Error 593.0060996
Multiple R 0.821466955
Adjusted R Square 0.6477086213
R Square 0.6748079582
Table 8
Coefficients Standard Error t Stat P-value
Intercept -221.1084004 175.0947179 -1.262793093 0.2306505923
X Variable 1 0.02673256409 0.005357101197 4.990117437 0.00031447436
REFERENCES