Impact of the Foreign Institutional Investments on Stock Market: Evidence from India

The present study is an attempt to determine the impact of Foreign Institutional Investments (FIIs) on Indian stock market as India has emerged as one of the most attractive investment destinations in Asia. To achieve the above objective, the study has utilized the daily data on stock market index (Sensex), FII flows and other related variables for a period of 22 years ranging from January 1986 to December 2007. The study has used combined regression time series model and GARCH Model for determining the impact of FIIs on share market return and volatility, respectively. The results show that volatility of Indian stock market as well as its return has declined after opening the stock market for FIIs.