A Study of Foreign Institutional Investments and Its Impact: -

Abstract

The present study aims at exploring the determinants of Foreign Institutional Investors’ (FII’s) investment in India. Returns on Indian stock market have positive impact whereas US stock market returns have no significant influence on FII’s investment to India. Stock market risk has negative influence on FII’s inflows to India. Market capitalization and stock market turnover of India have significant positive influence only in short-run. Among macroeconomic determinants, economic growth of India has positive impact on FII’s investment both in long-run and short run. But all other macroeconomic factors have significant influence only in long-run like inflation in US has positive influence whereas inflation in India has negative influence on FII’s investment. Further, US interest rate has adverse impact on FII’s investment while liberalization policies of India exhibited significant contribution to FII’s inflows. Study concludes that FII’s inflows in India are determined by both stock market characteristics and macroeconomic factors.