A project report on analysis of FII investment in Indian market

Abstract

Since the beginning of liberalization FII flows to India have steadily grown in importance. As a part of its initiative to liberalize its financial markets, India opened her doors to Foreign Institutional Investors in September 1992. This event represents a landmark event since it resulted in effectively globalizing its financial services industry. The foreign institutional investors (FIIs) have emerged as important players in the Indian equity market in the recent past. This study makes an attempt to develop an understanding of the dynamics of the trading behavior of FIIs. Along with this the purpose of study is to find out the impact of FII inflows on Indian stock market, do we need FII inflows? Do FII play an important role in Indian equity market? And at last should we encourage FII inflows? For this monthly, yearly data of FII inflow is taken into consideration. First, the introduction about the Indian economy and FIIs is given followed by the conceptual framework, guidelines, investing limits in Indian companies is observed. Second, trends in FII flows and FII activities up to March 2012 are considered. This is followed by the role of FIIs in the Indian stock market. As per the study done it is found out that the trading behavior of FII do not have a destabilizing impact on the equity market. It can be said that we can encourage FII inflows into India through appropriate regulation of PNs and sub-accounts and invent a series of check and balances system so as to protect the economy and look over the fact that the economy works best with such kind of filters system. Thus, it can be said that FII do play an important role in Indian equity market.