TOPIC : A Study on Impact
of Foreign Institutional
Investors on Indian Stock
Exchange (2009-2019)
NAME : MOHAMMED MUBEEN
ROLL NO : XXX-XXXX-XXX
A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
INTRODUCTION
Foreign Institutional Investor (FII) means an institution established or incorporated outside India
which intends to make investment in securities in India. They are registered as FIIs in accordance
with Section 2 (f) of the SEBI (FII) Regulations [Link] India FIIs investment started in September
1992.
This was the landmark event since it led to effectively globalizing the financial services industry.
In the beginning mutual funds, pension funds, investment trusts, Asset management companies,
nominee companies and incorporated/institutional portfolio managers were allowed to invest in
Indian stock markets directly. But later registered university funds, endowment, foundations,
charitable trusts were also included. Since then, FII flows which shape a part of foreign portfolio
investments have been gradually mounting an importance in India. The FIIs are major institutional
investors in Indian capital market.
Since 1990-91, the Government of India embarked on liberalization and economic reforms with a
view of bringing about rapid and substantial economic growth and move towards globalization of
the economy. As a part of the reforms process, the Government under its New Industrial Policy
revamped its foreign investment policy recognizing the growing importance of foreign direct
investment as an instrument of technology transfer, augmentation of foreign exchange reserves
and globalization of the Indian economy. Simultaneously, the Government, for the first time,
permitted portfolio investments from abroad by foreign institutional investors in the Indian capital
market.
The entry of FIIs seems to be a follow up of the recommendation of the Narsimhan Committee
Report on Financial System. While recommending their entry, the Committee, however did not
elaborate on the objectives of the suggested policy. The committee only suggested that the capital
market should be gradually opened up to foreign portfolio investments. From September 14, 1992
with suitable restrictions, Foreign Institutional Investors were permitted to invest in all the
securities traded on the primary and secondary markets, including shares, debentures and warrants
issued by companies which were listed or were to be listed on the Stock Exchanges in India.
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
DATA COLLECTION AND DESCRIPTION
COUNTRY WISE FII REGISTERED
WITH SEBI IN INDIAN CAPITAL MARKET.
NAME OF THE COUNTRY NO. OF FII
USA 577
UK 260
Luxemburg 112
Mauritius 102
Canada 77
Hong Kong 70
Singapore 81
Australia 64
Ireland 64
Netherland 33
South Korea 21
Taiwan 22
Denmark 24
Switzerland 23
France 27
Malaysia 19
Sweden 12
Cayman Island 18
Channel Island 12
Norway 11
Austria 12
UAE 16
Germany 18
Others* 94
Total 1753
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
DIAGRAMATIC REPRESENTATION
NO. OF FII
USA
UK 12
11 18
Luxemburg 18 16
12 94
Mauritius
12
Canada 19
Hong Kong 23
27
24
Singapore 22
Australia 577
21
Ireland
33
Netherland
South Korea 64
Taiwan
Denmark 64
Switzerland
France
81
Malaysia
Sweden
70
Cayman Island
Channel Island
77
Norway 260
Austria 102
UAE 112
Germany
Others*
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
STATISTICAL ANALYSIS
Months Net Equity Net Debt
April 6508 2490
May 26626 -222
June 30456 847
July 41520 2962
August 46241 2583
September 64766 4812
October 73844 11706
November 79341 12391
December 90290 10868
January 89074 19781
February 89574 22928
March 110218 32437
Graph
Graph Showing Net Equity and Net Debt for the Year 2009 - 1010
March, 110218
Net Debt,
March, 32437
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
Graph showing the performance of BSE SENSEX for the
year 2009-2010
11- 10-
11-Jan 11-Feb 10-Apr 10-Jun 10-Jul 10-Aug 10-Sep 10-Oct 10-Nov 10-Dec
Mar May
BSE SENSEX Price 16,357. 16,429.17,527. 11,403. 14,625. 14,493. 15,670. 15,666. 17,126. 15,896. 16,926. 17,464.
INTERPRETATION
● The Turnover of Foreign Institutional Investor (FII) on Equity and Debt for the
Year 2009- 2010 In That Year the Equity Buying and Selling Has Increased. On
April 2009 The Net Equity Is 6508 and On March 2010 The Net Equity Has
Increased To 110218
● From the above BSE SENSEX graph it is clearly shown that in the beginning of
the year 11403 in December 2009 and net equity in December is 90290 in year
2009 and in the end of the year is equity is 110218
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
APPLICATION IN MANAGEMENT
Pension funds:
A pension fund could be a pool of assets that type associate freelance legal entity that area unit
bought with the contributions to a programmed for the exclusive purpose of funding programmed
edges. It manages pension and health edges for workers, retirees, and their families. FII activities
in India are gathered momentum mainly after the entry of CalPERS (California Public Employees‟
Retirement System), an outsized US-based pension fund in 2004.
Mutual funds:
A Mutual Fund could be a professionally managed style of collective investment theme that pools
money from several investors and invests it in stocks, bonds, short run securities industry
instruments, or different such securities. The Mutual Fund can have a fund manager that trades the
pooled money on a daily basis, return or losses area unit then distributed to the investors.
Investment trust:
Investments trust could be a style of collective investment. Investment trusts area unit closed-end
funds and area unit ingrained as public restricted corporations. A collective investment theme
could be an approach of finance money with others to participate during a wider varies of
investments than possible for many individual investors, and to share the prices and edges of doing
this.
Investment banks:
An investment bank could be a financial organization that raises capital, trades in securities and
manages company mergers and acquisitions. Investment banks gain money in on corporations and
governments by raising money through issuance and commercialism securities in capital markets
(both equity, debt) and insuring bonds (e.g. commercialism credit default swaps), yet as providing
recommendation on transactions like mergers and acquisitions.
Hedge funds:
A hedge fund is associate investment fund hospitable a restricted vary of investors that's allowable
by regulators to undertake a wider vary of investment and commercialism activities than different
assets, and that, in general, pays a performance fee to its investment manager.
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
ADVANTAGES AND LIMITATIONS
ADVANTAGES OF THE STUDY
• To find out the relationship between FII and Indian Stock Market.
• To determine the behavior and trend of FII’s on Indian stock market
• To determine the factors that influence investment decision of FII’s.
• To examine whether FIIs have any influence on various BSE indices
• To study the structure and functioning of FIIs in the Indian capital market
LIMITATIONS OF THE STUDY
• The study relates to the Indian stock market only. Not for global markets.
• The study pertinent for the BSE SENSEX, NSE and industrial sectors indices only.
• The study narrated with only FII investments, FDI investments do not consider.
• This study is based on secondary data derived from published annual reports of the selected
units. The reliability and finding are contingent upon the data published in annual report.
• The inferences made are purely from the past year’s performance of variables.
• The study use different statistical tools and techniques, so its own limitation which also apply
to this study.
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
CONCLUSION
Conclusion FIIs contribution to the Indian stock market has great influence on the market. But
their investment is fluctuating from time to time from 2009 - 2019. FIIs withdrawal has plummeted
down the share price. Apart from FIIs investment there are other major factors that influence the
bourses in the stock market, but FII is definitely one of the factors. There has been a correlation
between FIIs investment in equity and NSE Capital market segment. But the relationship is
significant at 1% level. Our results prove that FIIs did have a moderate significant impact on the
Indian capital market. Therefore, the alternate hypothesis is accepted. FII'S have a positive impact
on NSE.
The Indian stock markets have come of age where there are significant developments in the last
15 years that make the markets on par with the developed markets. The important feature of
developed markets is the growing clout of institutional investors and this paper sets out to find
whether our markets have also being dominated by institutional investors.
The results of my research conveys that, FIIs are strong forces driving the Indian Stock Market
which is evident from top twenty five crashes at BSE SENSEX as FIIs were the net sellers in all
the leading market crashes. This study further gives the scope for identifying the role of FIIs in
India in overall market volatility.
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A Study on Impact of Foreign Institutional Investors on Indian Stock Exchange (2009-2019)
REFERENCE
1. Choe, Y., Kho, B.C. and Stulz, R.M. (1998). “Do Foreign Investors Destabilize
Stock Markets? The Korean Experience in 1997”, NBER Working Paper 6661,
NBER Cambridge M A.
2. Douma, S., Kabir, R. and Rejie, G. (2006). “Foreign and domestic ownership,
business groups and firm performance-Evidence from large emerging market”,
Strategic Management Journal, Vol. 27, No. 7, pp. 637-657. Gordon, J. and
Gupta, P. (2003). “Portfolio Flows into India: Do Domestic Fundamentals
Matter?” IMF Working Paper, Number WP/03/02.
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