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In this paper, we study the effect of foreign institutional investment (FII) on the stock market of India and find that FII has a direct and significant effect on the returns of the Indian stocks. We also examine the determinants of the FII in Indian markets and find that net FII increases with an increase in the Indian stock returns and vice versa. We also document that high interest rates in India result in reduced FII, and the net FII increases with a decrease in the P/E of Indian stocks. Strong dollar lowers net FII, and high inflation in the U.S. results in reduction of net FII in India. We investigate the role and impact of FII whether they stabilize or destabilize the domestic markets. Whether the Indian stock market is influenced by the FIIs in a position or negative is determined. The FIIs has a statistically significant influence on the stock market returns, even after fundamental economic factors are controlled is finally investigated along with the factors responsible for purchasing and selling decisions by FIIs to reduce erratic investment patterns. [ABSTRACT FROM AUTHOR]

This paper presents an empirical study on predictability in the Indian stock market, based on cointegration analysis involving a stock price index and relevant macro and financial variables. This exercise has been done separately for each of the three most important stock indices viz., BSE SENSEX, BSE 100 and NIFTY. Following essentially Johansen's approach, our findings based on the trace and maximum eigenvalue tests indicate that there exist cointegrating relations involving a stock index and the following macro variables viz., domestic industrial production, consumer price index, nominal exchange rate, foreign direct investment and long-term interest rate. Further, the cointegrating relations corresponding to each of the three stock indices involve the same set of macroeconomic variables as stated above. None of the other variables considered in this study viz., and the financial ratios has been found to be significantly involved in the cointegrating regressions. [ABSTRACT FROM AUTHOR]

Phenomenal growth has been observed in the Indian Stock Market because of domestic and international investments much to the credit of first and the second phase of reforms in the financial sector. The study tests the volatality of the Indian Stock Markets to foreign institutional flows in equity markets using two indices of the country largest and prominent stock exchnages viz. BSE and NSE. The indices so chosen are S & P CNX Sensex and Nifty. The assessment is made for a period of eleven years from January 2000 to December 2011. Findings indicate significant impact of FII flows on the Indian stock market. It is found that FIIS were net sellers in year 2008 and 2011 and these were the worst years for the stock markets. Fils remained the key mover and shakers of the market especially on account of the global financial crisis. [ABSTRACT FROM AUTHOR]