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But the sub-prime crisis and other economic conditions had caused a liquidity crunch for these institutions. So they are forced to withdraw money from Indian market so as to repay loans they had taken. These withdrawals had caused panic in market, and even domestic
investors are making them sell their shares.

But one aspect we should agree on is that the FII's increased role had changed the face of Indian stock market. It had brought both quantitative and qualitataive change. It had also increased the market depth and breadth. The emphasize on fundamentals had caused efficient pricing of shares. Since there is no condition on FIIs that they should disclose in which company they are investing, those figures are not available.

Many qualitative tests like regression tests had proved that there is direct relation between market movements and fund flows of FIIs. In this, we will analyze the investments in different months and years, and tries to find the impact of FIIs in stock market.

Introduction

FII (Foreign Institutional Investors) is used to denote an investor, it is mostly of the form of a institution or entity which invests money in the financial markets of a country. The term FII is most commonly used in India to refer to companies that are established or incorporated outside India, and is investing in the financial markets of India. These investors must register with the Securities & Exchange Board of India (SEBI) to take part in the market.

History of FII

India opened its stock market to foreign investors in September 1992, and in 1993, received portfolio investment from foreigners in the form of foreign institutional investment in equities. This has become one of the main channels of FII in India for foreigners. Initially, there were many terms and conditions which restricted many FIIs to invest in India.

But in the course of time, in order to attract more investors, SEBI has simplified many terms such as: -

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* Contributed by: -
T. N. Aravind, V. Venkata Raghavendra & Suby Philip,
Engineering graduates currently pursuing PGDBM from Institute of Public Enterprise (IPE), Hyderabad.
Article posted on October 18, 2008.