FII AND INDIAN STOCK MARKET

In fact, Foreign Institutional Investor ( FII) is allowed to enter into INDIA only through stock markets either in the form of equity of debt. Thus it makes an impact on the rise or fall of Sensex or nifty, since FII is allowed to be purchased or sold daily. The daily transaction of FII is the reason behind the volatility in the stock markets and has strong impact on the various macro-economic variables and the economy as a whole. The impact of variation in inward or outward flow of FII can be simply exhibited in NIFTY LIVE behavior pattern. The impact of FII can be best interpreted by explaining the recent behavior of market. The second half of NIFTY FUTURE February series showed a well deserved consolidation after a long BULL-MARKET. However, NIFTY FUTURE March series ended up with SENSEX slipping below psychological mark of 18000. These all epitomizes the immense impact of FII flow in the Indian Stock Market. Intraday traders do take care of FII activity meticulously.
FII—THE BASICS
Most of the under developed countries suffer from low level of income and capital accumulation. Though, despite this shortage of investment, these countries have developed a strong urge for industrialization and economic development. As we know the need for Foreign Capital arises due to shortage from domestic side and other reasons. Indian economy has experienced the problem of capital in many instances. While planning to start the steel companies under government control, due to shortage of resources it has taken the aid of foreign countries. Likewise India has received aid from Russia, Britain and Germany for establishing Bhilai, Rourkela and Durgapur steel plants. It has been observed that the FIIs investment has shown significant improvement in the liquidity of stock prices of both BSE and NSE. However, it is believed that there exists a high degree of positive correlation between FIIs.
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