They increased depth and breadth of the market.

They played major role in expanding securities business.

Their policy on focusing on fundamentals of the shares had caused efficient pricing of shares.

These impacts made the Indian stock market more attractive to FIIs and also domestic investors, which involves the other major player MF (Mutual Funds). The impact of FIIs is so high that whenever FIIs tend to withdraw the money from market, the domestic investors become fearful and they also withdraw from market.

Just to show the impact, we analyze below the 10 biggest falls of stock market: -

Major Intra Day Collapses in BSE Sensex

From this table, we can see that the major falls are accompanied by the withdrawal of investments by FIIs. Take the case on January 18, 2008, the Sensex lost almost 687 points. Here, the net sales by FIIs was Rs. 1348.40 Crores. This is a major contributor to the fall on that day. But contrary to that day, take the case on January 21, 2008, the Sensex lost 1408 points and the gross sales was Rs. 1060.30 Crores and the purchases were Rs. 3062.00 Crores. So this can be concluded that after the fall of market, FIIs had invested again into the market. From this, we can see the effect of FIIs.

Next

* 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.