Fii in India

Equity markets in India have risen from that of market cap (of NSE) from 3633 billion in 1994-95 to 52322 Billion in 2013-2014. Over years debt markets have matured and have reached a level of Rs. 382,097 Million in October 2014. The investments in India exhibit a pattern which is in line with global business cycle, i.e. when global economy is booming India has seen greater investments than ever. In Year 2007 India drew investments amounting to Rs. 87000 Cr. This was a period when U.S. economy was at its peak. And India reached 140% of Market Capitalisation as a percentage of GDP during this period. India due to its strong domestic demand led economy is cushioned against the global factors and received considerable FII investments among other developing economies including BRICS. This paper examines the pattern of FII inflows and outflows in the Indian equity and debt markets with a critical review of the reasons behind these inflows and outflows.

Increasing presence of retail investors, in the Indian financial markets, calls for extensive study on their investment habits and behavior. The current study tries to understand the impact of the demographic characteristics of the individual investor on risk appetite, investment habits and selection of mutual funds as an investment choice. The study also investigates the impact of the demographic characteristics on choice of risky investment options Vs. Non risky options and all the investment options together. Statistical tests used have been used to conclude that the demographic variables age and income have an influence on the investment choice of mutual funds. Based on the results of tests conducted on the data collected it was found that income levels of a respondent have an influence on the selection of the risky investment choices. It has been found that the previous literature has mainly focused on the relation between the demographics and selection of mutual funds alone or only single class of financial instruments. The current paper has categorized the investment into risky and non-risky, to study the association of the categories with the demographics of the sample. However the test was conducted with a sample size of 100. The sample selection method used in the study was convenience sampling. Similar studies can be conducted with a larger sample size. Stratified sample or cluster sampling method or stratified sampling method could be used to have a better representation of the population. It would be interesting to study how the data would behave on a larger scale. Further studies in the same line are very important on many fronts .Considering the importance of the retail investor in a developing economy like India; the current study would help us to understand the retail investor better. A better understanding of the behavior of the end user, will help the finance professionals to design more custom made financial products in the coming future.

Initiation of reform process in early 1990’s transformed India’s policy stance on development strategy completely. Initial approach of financing current account deficit mainly through debt flows and official development assistance has changed to harnessing non-debt creating capital flows. Under this strategy from September 14, 1992; Foreign Institutional Investors (FIIs) were permitted to invest in financial instruments in India. Since then Indian financial markets have changed substantially in its size, depth and character. In this period, Indian and world markets have seen good times and periods of crises both on external fronts and in financial markets. This paper tries to evaluate role of FIIs in Indian markets due to increasing share of FIIs in financial markets in India.

The paper aims to tell the story of foreign institutional investors, advent in India. The study examines the nature of the FII flows into India. The study is spread across mainly four points of investigation. It attempts to understand if there was a significant change in the flow of FII investment before and after the economic crisis of 2008.The study intends to investigate if investments made in India, by FIIs of different countries are significantly different, quantum of investment made by FIIs in different Industrial sectors significantly differ, if there is significance of difference between the FII and DII investment flows. Data form the website of NSDL and SEBI was used in the study. FII & DII fund flows, in India, of the last 27 years have been used for the study. Based on the results of the test conducted it was concluded that there is no significant statistical difference in the quantum of FII flows before and after the financial crisis of 2008.The amount invested by the FII's in various Industrial sectors in India, was found to be significantly different. There was no significant difference in the yearly investments made by different countries investing in India. The difference between the flows of FII and DII in India was found to be insignificant and negatively correlated. The current study could be extended in the future to study the impact of FII on the Indian retail investors' investment choices. More study on whether the retail investors follow the investment pattern of the FII and DII needs to be done. A predictive model for the investor could be devised, to make better investment choices, by following the foreign institutional investor and domestic institutional investors.

Liberalization of economic policies in 1992 allowed foreign institutional investors investing in Indian capital markets. Though FII permitted to invest Indian stock markets in 1992, they actually started investing in India from 1997 and factual growth of FII investment came after 2002. Since then participation of FII in Indian stock market has continuously increased. They have emerged to be one of the largest investors and have acquired ownership of substantial proportion of non-promoter shares. They have also emerged to be dominant market players contributing very high proportion 41.73% of total stock exchange turnover of BSE and NSE combined. In Indian markets, FII are perceived to be very large and sophisticated investors with very high impact on stock market returns. Many investors and market participants tend to make their stock market strategy based on investment pattern of FII and base their stock market analysis on their perception about factors considered by FII in their investment decision. In this context this paper studies perception of market participants about major determinants of FII investment decision and extent to which investors are influenced by FII investment.