Impact of Foreign Institutional Investors on the Indian Capital Market: Examining the Influence of Foreign Institutional Investors on the Indian Capital Market

Abstract

Foreign institutional investment suggests investments made by individual investors or companies in foreign lands. India has been observing a surge in FII activity since the opening of its capital markets. Owing to its high increase prospective, India has become a preferred purpose for FII activity. FIIs, convinced of India’s economic growth and strong corporate earnings, are continuously investing in the country. Fast GDP growth has made India a preferred destination for foreign investors post the 2008 financial crisis. In 2010 itself, India attracted nearly US$ 30 billion of net foreign inflows, which was just under 50 per cent of all inflows into promising Asian markets, excluding China. Foreign investors have invested Rs 6,460 crore (US$1.45 billion) in Indian stock markets in just five trading sessions of July 2011.In the first six months of 2011, overseas investors infused around Rs 17,000 crore (US$3.82 billion) into the Indian market, including stocks and bonds. In the same period, FIIs made investments of Rs 9,948 crore (US$2.23 billion) in the debt market, with investments in stocks being Rs 2,670 crore (US$ 599.79 million).This paper analyses the role ahead for the Foreign Institutional investors in the present Indian economic Scenario with the focus on the impact on the Indian Capital Market.