Impact of Foreign Institutional Investors on the Indian Capital Market

Abstract

Foreign institutional investment signifies investments made by individual investors or companies in foreign lands. India have been witnessing a surge in FII activity since the opening of its capital markets. Owing to its high growth potential, India has become a favorite destination for FII  activity. FIIs, convinced of India’s economic progress ad strong corporate earnings, are continuously investing in the country. Fast GDP growth has made India a preferred destination for foreign investors post the 2008  financial crisis. In 2010 itself, India attracted nearly US$ 30 billion of net foreign inflows, which was just under 50 per cent of all inflows into emerging Asian markets, excluding China. Foreign investors have invested Rs 6,460 crore (US$1.45 billion) in Indian stock markets in just five  trading sessions of July 2011.In the first six months of 2011, overseas investors infused around Rs 17,000 crore (US$3.82 billion) into the Indian market, including stocks and bonds. In the same period, FIIs made  investments of Rs 9,948 crore (US$2.23 billion) in the debt market, with investments in stocks being Rs 2,670 crore (US$ 599.79 million).This paper analyses the role ahead for the Foreign Institutional investors in the  present Indian economic Scenario with the focus on the impact on the Indian Capital Market.