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					International Research Journal of Finance and Economics
ISSN 1450-2887 Issue 68 (2011)
© EuroJournals Publishing, Inc. 2011
http://www.eurojournals.com/finance.htm


            Foreign Institutional Investment in Indian Capital
                  Market: A Study of Last One Decade

                                       Narendra Singh Bohra
                 Assistant Professor, Faculty of Management Graphic Era University
                                   Dehradun, Uttarakhand (India)
                    E-mail: thakur_bohra@rediffmail.com, nsbohra7@gmail.com

                                          Akash Dutt
          Student (MBA – Finance Group), Faculty of Management Graphic Era University
                                 Dehradun, Uttarakhand (India)


                                                Abstract

             Since the beginning of liberalization(1991) FII flows to India have steadily grown in
     importance, any economy in the world is major affected by the foreign investment and the
     movement of its capital market, as an indicator of performance of its various companies in
     a particular industry. The dawn of 21st century has shown the real dynamism of stock
     market and the various benchmarking of sensitivity index (Sensex) in terms of its highest
     peaks and sudden falls. This paper attempts to understand the behavioural pattern of FII in
     India and figure out the reason for indifferent responses of BSE Sensex due to FII inflows.
     The data for the study uses the information obtained from the secondary resources like
     website of BSE sensex. The paper consists of two sections; the first section aims at
     understanding the behavioural pattern of FII by identifying the Decade trend analysis of FII
     investment in India, the second section attempts to present the correlation between FII
     turnover and turnover of different individual groups of shares in BSE sensex.


     Keywords: FII, BSE, Correlation

Introduction
A well-developed stock market has its impact on the development of economy. It provides investors
with an array of assets with varying degree of risk, return and liquidity. This increased choice of assets
and the existence of a vibrant stock market provide savers with more liquidity and options, thereby
inducing more savings. Increased competition from foreign financial institutions also paves the way for
the derivatives’ market. All this, according to the mainstream belief, encourages more savings in equity
related instruments. This, in turn, raises the domestic savings rate and improves capital formation.
        Above model indicating that portfolio investment is also a stimulus of economic development
because, it’s a main source of fund of corporate. The demand of portfolio investment is created by
companies and their routes are decided by government. It is considered as less reliable source of fund
for economic development because its fluctuate on some minor trends of economy.
International Research Journal of Finance and Economics - Issue 68 (2011)                          104
                       Link Model: Portfolio Investment and Economic Development




                                                 Share Price Up
                   FII


            More Players &                        Liquidity Up
        Efficiency Encouraged.

            •    Intermediaries
                 ,Broker and                                           Cost of Issue Down
                 Underwriter              More Supply
                                           Liquidity
            •    Mutual Funds,
                                           Demand
                 Insurance
                 Companies and
                 Individuals.
            •    Issuers




                                  More Equity Issued
                Local and
                Foreign                                             Cheaper Capital
                Demands                                             More Stock Issue
                Increased                                           New Listing




Review of Literature
Many empirical studies have been conducted to examine the relationship between stock prices and
buying of equity by FIIs in Indian stock market. Fang and Loo (1994) studied the relationship
between the stock return volatility and international trade for four Asian Countries. Radelet and Sachs
(1998) attributed the East Asian economic crisis to financial panic due to sudden reversal of portfolio
investment. Academicians often argue that foreign investors destabilize stock prices due to various
reasons. According to Dornbusch and Park (1995) foreign investors pursue a positive feedback
strategy, which makes stocks to overreact to change in fundamentals. Agarwal (2000) based on the
correlation of returns during the period 1987-1996 found that emerging markets exhibit a high
correlation with one another except for some of the South-East Asian economies, where the overall
correlation between the emerging market is low. The study of Thomas J. Flavin, Margaret J. Hurley
and Fabrice Rousseau (2001), reveals that a gravity model, frequently used to explain trade patterns,
105                        International Research Journal of Finance and Economics - Issue 68 (2011)

is used to explain stock market correlations. They found that geographical variables still matter when
examining equity market linkages. In particular, the number of overlapping opening hours and sharing
a common border tends to increase cross-country stock market correlation. These results may stem
from asymmetrical information and investor sentiment, lending some empirical support for these
explanations of the international diversification puzzle. Batra (2003), using both daily and monthly
data attempted to understand the trading behavior of FIIs and returns in Indian equity market. He found
the strong evidence of FIIs chasing trends and adopting positive feedback and herding trading
strategies. Mishra (2004) explored the relationship between stock markets and foreign exchange
markets using Granger causality test and the VAR technique. The study found that there exists a
unidirectional causality between exchange rate and interest rate and money rate. Badhani (2005) has
attempted to examine the long-term and short-term relationship among stock prices, dollar-rupee
exchange rate and net FII investment in India, using the monthly data of BSE sensex, dollar-rupee
exchange rates and net monthly FII investment flows from April 1993 to March 2004. The study shows
that there is co integration between net FII investment flow and stock prices.

Research Objective
 •    To study the behavioral pattern of FII in India with special reference to 2000 to 2009.
 •    To establish a relationship between FII and different groups of shares in BSE India.

Research Methodology
The study describes the behavioral pattern and correlation between FII investments in India with
special reference to BSE Sensex and also with groups of shares in BSE Sensex. It is based on
secondary data obtained from websites, newspaper and journals. The main objective of the present
paper is to determine impact and relationship between the Indian stock market, net foreign institutional
investment. To test this, we employ the methodology of correlation (linear dependence) between two
variables X and Y, giving a value between +1 and −1 inclusively. This study is divided in to two
sections:

Section - 01
   • Exploring the behavioral pattern of FII in India in special reference to BSE sensex.

Section - 02
   • Attempts to establish the correlation between FII and individual group’s securities in BSE
       sensex.

Section – 01
FII in India (2000 – 2009)
Foreign institutional investors have gained a significant role in Indian capital markets. Availability of
foreign capital depends on many firm specific factors other than economic development of the country.
In this context this paper examines the contribution of foreign institutional investment particularly
among companies included in sensitivity index (Sensex) of Bombay Stock Exchange. Also examined is
the relationship between foreign institutional investment and firm specific characteristics in terms of
ownership structure, financial performance and stock performance. It is observed that foreign investors
invested more in companies with a higher volume of shares owned by the general public. The
promoters’ holdings and the foreign investments are inversely related. Foreign investors choose the
companies where family shareholding of promoters is not substantial. Among the financial
performance variables the share returns and earnings per share are significant factors influencing their
investment decision.
International Research Journal of Finance and Economics - Issue 68 (2011)                              106

        Foreign portfolio inflows through FIIs, in India, are important from the policy perspective,
especially when the country has emerged as one of the most attractive investment destinations in Asia.
In this paper an effort has been made to develop an understanding of the investment decisions in
different group of shares in BSE, and behavior of the FIIs in the Indian equity market of last ten years.
This study show that the FII in India was maximum in 2004 then it starts declining (Table -01), then it
faced the challenged of global crisis, in 2007 the net sale of shares by foreign investors is mare then net
purchases.

Table 1:    FII in India (In Rs Cr)

           YEAR                       PURCHASES                   SALES                     NET
            2000                          32913                    27028                     5885
            2001                        19325.76                 15859.28                  3466.48
            2002                        15535.76                 15446.28                   89.48
            2003                          32882                    24196                     8686
            2004                        59910.12                 47624.19                 12285.93
            2005                         113960                   107480                     6480
            2006                         132933                   131548                     1385
            2007                         202468                   208968                    -6500
            2008                         100077                   120491                   -20414
            2009                          89069                    82866                     6204
 TOTAL                                 799073.64                781506.75                 17567.89

FII and BSE Sensex India
Sensex is the commonly used name for the Bombay Stock Exchange Sensitive Index – an index
Composed of 30 of the largest and most actively traded stocks on the Bombay Stock Exchange (BSE).
The term FII is used most commonly in India to refer to outside companies investing in the financial
markets of India. FII investment is frequently referred to as hot money for the reason that it can leave
the country at the same speed at which it comes in. In country like India; statutory agencies like SEBI
have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs. It
has been found by the study (Table-02) that BSE Sensex and foreign institutional investment has
followed a closed relationship, when net sensex was moved up than the FII was also increased and
when net sensex was down the total FII was goes gown.

Table 2:    BSE Sensex and FII (In Rs Cr)

                Year                               NET SENSEX                        NET FII’s
                2000                                 -1448.56                          59941
                2001                                   -96.91                         3466.48
                2002                                  -451.46                          89.48
                2003                                  2509.65                          8686
                2004                                   751.97                        12285.93
                2005                                  4674.92                          6480
                2006                                  1507.74                          1385
                2007                                  3189.07                          -6500
                2008                                 -5918.12                         -20414
                2009                                  7625.78                          6204
107                                                  International Research Journal of Finance and Economics - Issue 68 (2011)

                                                                         FII and Sense x R elationship

                                                15000

                                                10000

                                                 5000



                        FII & B SE T ur nover
                                                    0
                                                            1      2           3     4       5          6      7        8        9    10
                                                -5000

                                                -10000

                                                -15000

                                                -20000

                                                -25000
                                                                                                 Year


                                                                                     NET S ENS EX           NET FII’s



Section – 02
FII and Individual Group Securities in BSE
The Bombay Stock Exchange (BSE), India’s leading stock exchange, has classified Equity scripts into
categories A, B1, B2, S, T, TS, & Z to provide guidance to the investors. The classification is on the
basis of several factors like market capitalization, trading volumes and numbers, track records, profits,
dividends, shareholding patterns, and some qualitative aspects. On the basis of the study it has been
found that some group of shares attract the attention of FII at larger (Table -03), some at very low and
some group of shares are completely unable to attract the attention of foreign investors these groups are
negatively co-related with the total FII in India. This study taking forward by studying each group of
shares with total FII individually, explaining the reasons of low and high investment by foreign
intuitional investors in India.

Table 03: FII in Different Group of Shares (In Rs Cr)

                 A         B1                               B2        S               T          Z              F             G         B        ST     NET
   YEAR       GROUP     GROUP                            GROUP     GROUP           GROUP     GROUP          GROUP           GROUP    GROUP     GROUP    FII's
    2000       908947   70951.6                           7323.3     NA              NA        45.8           42.96          NA        NA        NA     59941
    2001       281969   22233.1                           2111.7     NA              NA        17.09          82.69          NA        NA        NA    3466.48
    2002       266651   43340.7                           3962.9     NA              NA        22.59          94.9           1.45      NA        NA     89.48
    2003       437851   58641.2                           4568.6     NA             418.65    321.21         245.51          1.39      NA        NA     8686
    2004       398861   97269.7                           9272.1    5597.9         6335.89   1158.92         220.17          0.05      NA        NA    12285.9
    2005       482429    237055                           35541     46697          12146.4   1934.71         269.71          NA        NA        NA     6480
    2006       552460    312604                           33602     48663          7895.96    791.23         170.39          NA        NA        NA      1385
    2007       859286    551613                           96614     53904          15723.4   1480.74          235.7          NA        NA        NA     -6500
    2008       897682      NA                            158250     20277           1773.1    407.18         753.13          NA      20931.1     NA    -20414
    2009       963736      NA                              NA       37821          6138.06     20.76        1588.16           NA     368498     1006    6204
 TOTAL        6049872   1393708                          351245    212960          50431.4   6200.23        3703.32          2.89    389430     1006   17567.9
 Coefficien
 t of
 Correlati     0.513         0.992                        0.679        0.480        0.734        0.657       0.102          -0.721    -0.877
 on with
 Total FII


FII & Group-A Shares
‘A’ Group is a category where there is a facility for carry forward (Badla) to the next settlement cycle.
These are companies with fairly good growth record in terms of dividend and capital appreciation. The
scrip’s in this group are classified on the basis of equity capital, market capitalization, number of years
International Research Journal of Finance and Economics - Issue 68 (2011)                                                         108

of listing on the exchange, public share holding, floating stock, trading volume etc. As per the finding
of this study (Table - 04), this group of shares in the stock market attract the high interest of foreign
institutional investors in India, it has shown the incremental growth year by year after 2000, the FII
investment in this group of shares was maximum in year 2004 in the same years the total FII was
maxim in last decade.

Table 4:

                                                                               A GROUP
               Year                                                           TURNOVER                            FII TURNOVER
               2000                                                            908946.85                                59941
               2001                                                             281968.9                              35185.04
               2002                                                             266650.7                              30982.04
               2003                                                              437851                                 57078
               2004                                                             398860.9                              107534.31
               2005                                                             482429.3                               221440
               2006                                                             552460.2                               264481
               2007                                                             859285.6                               411436
               2008                                                             897682.1                               220568
               2009                                                             963736.3                               171935


                                                                        FII and A Gro up Shares

                                                        1 4000 00
                      Turnover (FII & A Group Shares)




                                                        1 2000 00

                                                        1 0000 00

                                                         8000 00

                                                         6000 00

                                                         4000 00

                                                         2000 00

                                                               0
                                                                    1    2   3    4   5    6      7   8   9   10

                                                                                       Yea r

                                                                    A GROUP TURNOVER              FII TURN OVER



FII & Group-B1 & B2
B1, B2’ Group is a subset of the other listed shares that enjoy higher market Capitalization and
liquidity than the rest. It is another group of shares which hold high market capital. As per the study it
has been observed that this group of shares attract the attention of investors quiet well till 2007-08
(Table – 05 and Table -06), but after the global crisis this group of shares unable to attract the
attention of foreign institutional investors.
109                                                      International Research Journal of Finance and Economics - Issue 68 (2011)
Table 5:

                                                                               B1 GROUP
           Year                                                               TURNOVER                                       FII TURNOVER
           2000                                                                 70951.62                                           59941
           2001                                                                 22233.14                                         35185.04
           2002                                                                 43340.67                                         30982.04
           2003                                                                 58641.2                                            57078
           2004                                                                 97269.7                                          107534.31
           2005                                                                 237055.4                                          221440
           2006                                                                 312603.5                                          264481
           2007                                                                 551612.5                                          411436
           2008                                                                                                                   220568
           2009                                                                                                                   171935


                                                                          FII a nd B 1 G r o u p S h a re s

                                                      6000 00
                  Turnover (FII & B1 Group Sha res)




                                                      5000 00


                                                      4000 00


                                                      3000 00

                                                      2000 00


                                                      1000 00

                                                            0
                                                                1   2     3      4       5            6   7      8     9     10
                                                                                             Y e ar

                                                                    B 1 G R O U P TU R NO V ER                FII TU RN O V ER



Table 6:

                                                                               B2 GROUP
           Year                                                               TURNOVER                                       FII TURNOVER
           2000                                                                 7323.26                                            59941
           2001                                                                 2111.74                                          35185.04
           2002                                                                 3962.93                                          30982.04
           2003                                                                  4568.6                                            57078
           2004                                                                 9272.13                                          107534.31
           2005                                                                 35541.04                                          221440
           2006                                                                 33601.51                                          264481
           2007                                                                 96614.14                                          411436
           2008                                                                 158250.1                                          220568
           2009                                                                                                                   171935
International Research Journal of Finance and Economics - Issue 68 (2011)                                                                                                                         110

                                                                                                      FII a n d B 2 G ro u p S h a r e s


                                                   6000 00

                                                   5000 00




                      Turnover(FII & B2 Sha res)
                                                   4000 00

                                                   3000 00

                                                   2000 00

                                                   1000 00

                                                                                  0
                                                                                          1       2          3         4      5               6       7          8       9    10
                                                                                                                                  Y e ar

                                                                                                  B 2 G R O U P TU R N O V E R                            F I I TU R N O V ER



FII & Group-S
‘S’ Group represents scrip’s forming part of the BSE-Indonext segment. “The Exchange has introduced
a new segment named “BSE Indonext” w.e.f. January 7, 2005. The “S” Group represents scripts
forming part of the “BSE-Indonext” segment. “S” group consists of scripts from “B1” & “B2” group
on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30
crores. All trades in this segment are done through BOLT system under S group. As per the study it has
been found that (Table - 07) this group of shares attract the highest attention of investors in 2007 after
that it has been decreased substantially, as far as the correlation of total FII and S – Group share is
concern it has shown substantially correlated.

Table 7:

               Year                                                                                                   S Group                                                      FII Turnover
               2000                                                                                                                                                                    59941
               2001                                                                                                                                                                  35185.04
               2002                                                                                                                                                                  30982.04
               2003                                                                                                                                                                    57078
               2004                                                                                                  5597.87                                                        107534.31
               2005                                                                                                  46697.48                                                         221440
               2006                                                                                                  48662.72                                                         264481
               2007                                                                                                  53904.08                                                         411436
               2008                                                                                                  20276.97                                                         220568
               2009                                                                                                  37821.28                                                         171935


                                                                                                          F II a n d S G rou p S h are s


                                                                                5000 00
                                                                                4500 00
                                                                                4000 00
                                                    Turnover(FII & S Sha res)




                                                                                3500 00
                                                                                3000 00
                                                                                2500 00
                                                                                2000 00
                                                                                1500 00
                                                                                1000 00
                                                                                 500 00
                                                                                      0
                                                                                              1       2          3     4      5           6       7       8          9   10
                                                                                                                                  Ye ar

                                                                                                                     S G ro u p               FII Tu rn o ve r
111                                                 International Research Journal of Finance and Economics - Issue 68 (2011)

FII & T Group Shares
‘T’’ Also termed as the trade to trade group this category comprises of shares which have to be settled
in delivery for all buys and sells and square off of bought and sold positions during the day is not
permitted. This is a part of the surveillance from the BSE to counter any backward unwarranted
movements in such scrip’. In 2007 there is maximum FII in T – Group shares (Table - 08) and lowest
in 2008, year 2008 was the year when Indian economy faced impact of global crises and FII was
directly by correlated, but one interesting fact has been found that, in 2008 the total FII in India Rs
220568 crore and Rs 1773.1 crore that is minimum after 2005.

Table 8:

              Year                                                            T Group                                              FII Turnover
              2000                                                              NA                                                     59941
              2001                                                              NA                                                   35185.04
              2002                                                              NA                                                   30982.04
              2003                                                             418.65                                                  57078
              2004                                                            6335.89                                               107534.31
              2005                                                            12146.37                                                221440
              2006                                                            7895.96                                                 264481
              2007                                                            15723.35                                                411436
              2008                                                             1773.1                                                 220568
              2009                                                            6138.06                                                 171935


                                                                      FII an d T Gro u p S h ar e s


                                                    4500 00
                                                    4000 00
                         Turnover(FII & T Shares)




                                                    3500 00
                                                    3000 00
                                                    2500 00

                                                    2000 00
                                                    1500 00
                                                    1000 00

                                                     500 00
                                                         0
                                                              1   2       3      4      5          6       7      8       9   10
                                                                                           Ye ar

                                                                              T G ro u p               FII Tu rn o ve r



        GROUP-Z: ‘Z’ Group category comprises of shares of the companies which does not comply
with the rules and regulations of the Stock Exchange and are at times suspended from trading. As per
the study (Table - 09), this group of shares does not shown any co relation with the total FII in India
but it has attract the small attention of foreign portfolio invest.

Table 9:

              Year                                                            Z Group                                              FII Turnover
              2000                                                              45.8                                                   59941
              2001                                                             17.09                                                 35185.04
              2002                                                             22.59                                                 30982.04
              2003                                                             321.21                                                  57078
              2004                                                            1158.92                                               107534.31
International Research Journal of Finance and Economics - Issue 68 (2011)                                                               112
Table 9: - continued

               2005                                                          1934.71                                       221440
               2006                                                          791.23                                        264481
               2007                                                          1480.74                                       411436
               2008                                                          407.18                                        220568
               2009                                                           20.76                                        171935


                                                                      FII and Z G roup Share s


                                                     450000
                                                     400000
                          Turnover(FII & Z Shares)




                                                     350000
                                                     300000
                                                     250000
                                                     200000
                                                     150000
                                                     100000
                                                     50000
                                                         0
                                                              1   2      3     4     5      6      7     8      9   10
                                                                                         Year

                                                                             Z G ro up          FII Turno ver



        GROUP-F: ‘F’ Group represents the debt market segment or represents the Fixed Income
Securities. FII are always interested in high return that is the main reasons behind the slow attention of
FII in this group of shares.

Table 10:

               Year                                                          F Group                                     FII Turnover
               2000                                                           42.96                                          59941
               2001                                                           82.69                                        35185.04
               2002                                                            94.9                                        30982.04
               2003                                                           245.51                                         57078
               2004                                                           220.17                                      107534.31
               2005                                                           269.71                                        221440
               2006                                                           170.39                                        264481
               2007                                                           235.7                                         411436
               2008                                                           753.13                                        220568
               2009                                                          1588.16                                        171935
113                                                                         International Research Journal of Finance and Economics - Issue 68 (2011)

                                                                                                   F II an d F Gro u p S h ar e s


                                                   4500 00
                                                   4000 00




                      Turnover(FII & F Shares)
                                                   3500 00
                                                   3000 00
                                                   2500 00

                                                   2000 00
                                                   1500 00
                                                   1000 00

                                                                    500 00
                                                                               0
                                                                                       1       2           3       4       5           6          7       8       9        10
                                                                                                                               Ye ar

                                                                                                                F G ro u p                 FII Tu rn o ve r


Group-G"
G" group consist Trading in Govt. Securities for retail investors. As per the study this group of shares
unable to attract the attention of foreign institutional investors. Because the investment in government
security is tighten by strong regulations in India.

Table 11:

               Year                                                                                              G Group                                                        FII Turnover
               2000                                                                                                                                                                 59941
               2001                                                                                                                                                               35185.04
               2002                                                                                                 1.45                                                          30982.04
               2003                                                                                                 1.39                                                            57078
               2004                                                                                                 0.05                                                         107534.31
               2005                                                                                                  0                                                             221440
               2006                                                                                                  0                                                             264481
               2007                                                                                                  0                                                             411436
               2008                                                                                                  0                                                             220568
               2009                                                                                                  0                                                             171935


                                                                                                       FII a n d G G r o u p S h a re s


                                                                            4500 00
                                                                            4000 00
                                                 Turnover(FII & G Shares)




                                                                            3500 00
                                                                            3000 00
                                                                            2500 00
                                                                            2000 00
                                                                            1500 00
                                                                            1000 00

                                                                             500 00
                                                                                   0
                                                                                           1       2        3      4       5         6        7       8       9       10
                                                                                                                             Ye ar

                                                                                                                G G r ou p               F II Tu rn o v e r
International Research Journal of Finance and Economics - Issue 68 (2011)                                                  114

        GROUP-B: ‘B’ Group is a subset of the other listed shares that enjoy higher market
capitalization and liquidity than the rest. In this study one interesting fact has been found that this
group of shares was unable to find the attention of foreign investors till 2007. In 2008 this group of
shares has attract the attention of FII in India.

Table 12:

              Year                                                      B Group                             FII Turnover
              2000                                                                                              59941
              2001                                                                                            35185.04
              2002                                                                                            30982.04
              2003                                                                                              57078
              2004                                                                                           107534.31
              2005                                                                                             221440
              2006                                                                                             264481
              2007                                                                                             411436
              2008                                                      20931.12                               220568
              2009                                                      368498.4                               171935


                                                                 FII and B Group Share s


                                                600000

                                                500000
                     Turnover(FII & B Shares)




                                                400000

                                                300000

                                                200000

                                                100000

                                                    0
                                                         1   2      3     4    5     6      7    8      9   10
                                                                                  Year

                                                                        B Group          FII Turnover




Findings
   •   This study found that the behavior of FIII in last decade was opportunistic; profit accumulation
       was prime objective behind the portfolio investments in India.
   •   Year 2007 – 08 is the witness the world global crises and its impact in India, inflow of foreign
       capital (FDI/FIII) decreased/ stopped in this year.
   •   A good co – relation was found in the total FII turnovers and A group shares turnover, as ell as
       this has been attracted the highest attention of portfolio investors in India.
   •   There were certain groups of shares like G-group, B-group, ST-group, which do not find the
       substantial place in the investment basket of portfolio investors in India.
115                          International Research Journal of Finance and Economics - Issue 68 (2011)

      •   The lack of proper regulation has been found in the stock market for guiding the movement of
          foreign portfolio investors in India


Conclusion
The result shown a positive correlation between stock market and investment of FII’s in a relation that
sensex follows the investment behavior of FII’s, but there are some exception seen in year 2005 and
2008.The net foreign institutional investment, thus implying that the market informational efficiency
hypothesis can be rejected for BSE Sensitive Index with respect to the FII. It also shows that positive
or negative movement of FII’s leads to a major change/shift in the sentiments of domestic or related
investors in market. It suggests the policy implication that the authorities can focus on domestic
economic policies to stabilize the stock market. Where as in the case of individual group securities
FII’s had shown a positive correlation in less regulated and high capitalized securities in the market to
earn high equity yield. Investors can therefore apply profitable trading rules to earn supernormal
profits. Under the circumstances, the Indian stock market seems to be bearing the underlying strain not
currently visible at the surface. The implementation of profitable trading strategy may at any point of
time generate over-enthused investment and this, if coupled with market overreaction, may result in a
destabilized system. A point also to be noted here is the heavy investment and selling attitude of FII’s
causing a major hurdle in stabilization of market sentiments.


Reference
Research Articles
[1]       Ahluwalia, Montek S., 2002a, “Economic reforms in India since 1991: Has Gradualism
          Worked?,” Journal of Economic perspectives 16(3), 67-88.
[2]       Ahluwalia, Montek S., “India’s Economic Reforms: An Appraisal,” in Jeffrey Sachs and
          Nirupam Bajpa’s (eds.), “India in the Era of Economic Reform,” Oxford University Press, New
          Delhi, 2000.
[3]       Sigma. "World Insurance in 1999." No. 9/2000. Published by SwissRe. Available at
          www.swissre.com
[4]       Waldkirch, Andreas. 2003. “The ‘New Regionalism’ and Foreign Direct Investment: The Case
          of Mexico.” Journal of International Trade and Economic Development 12 (2): 151-184.
[5]       P K Mishra, “Wiil their dominance in the Indian market continue” Financial Express
          (September 15, 2006).
[6]       Singh, Narendra & Shailendra K “FII and Capital Market Development in India: A Study after
          Liberalization” international journal of business management, economics and information
          technology vol. 02 no.01 Jan – Jun 2010, 103 – 108
[7]       Bansal Anand, Pasricha. J.S. “foreign institutional investor’s impact on stock prices in India”
          journal of academic research in economics.
[8]       Kim, E. H. and Singal, V. (2000). Stock market openings: Experience of emerging economies.
          Journal of Business, University of Chicago Press, Vol. 73, No.1, 25-66.
[9]       Coondoo, Dipankar and Paramita Mukherjee (2004): ‘Volatility of FII in India’, Money and
          Finance, October-March.
[10]      Gordon, James and Poonam Gupta (2003): ‘Portfolio Flows into India: Do Domestic
          Fundamentals Matter?’, IMF working paper No 03/20.
[11]      De Santis, G. and Imrohoroglu, S. (1997). Stock returns and volatility in emerging financial
          markets. Journal of International Money and Finance, Elsevier, Vol. 16, No.4, 561-579.
[12]      Chukwuogor, Chiaku (2007). An econometric analysis of African Stock Market: Annual
          returns analysis, day-of-the-week effect and volatility of returns African Journal of Accounting,
          Economics, Finance and Banking Research, Vol. 1, No. 1, 26-43.
International Research Journal of Finance and Economics - Issue 68 (2011)           116

Websites
   •   http://dipp.nic.in/implrepo/implrepo1.pdf
   •   http://dipp.nic.in/dipp_manuals/CabinetDecisionsImplementation_Status.pdf
   •   http://www.cci.in/upload%5CArticle%5Cfile%5CFileLXTIVVICross-Boder-Merger-
       Acquisition.pdf.
   •   http://www.bseindia.com/mktlive/circuit_filter/upper_cf/groupwise.asp
   •   http://www.sebi.gov.in/Index.jsp?contentDisp=Database
   •   http://www.rbi.org.in/scripts/PublicationsView.aspx?id=12882
   •   http://www.rbi.org.in/scripts/PublicationsView.aspx?id=12883
   •   http://www.oppapers.com/essays/Impact-Of-Fii-On-Indian-Economy/623367.

				
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