To aid foreign private capital flows in form of Foreign Institutional Investors developing countries were advised by World Bank to develop their stock markets. It was suggested that these investments would help the stock markets directly through widening investor foundation and indirectly gripping the local authorities to improve the trading system. While the volatility associated with the foreign institutional investor's investment strategies is well known, there was also concern that foreign institutional investors might introduce distortion in the host country markets due to pressure on them to secure capital gains. Foreign flows such as foreign institutional investors have also known to influence the economic behavior of the country positively. Countries with well developed financial markets gain significantly from foreign institutional investors Given the huge volume of foreign institutional investor's capital flow and their influence on the domestic financial markets, it becomes important to asses the impact of foreign institutional investors impact on the Indian economy and Indian stock exchange.
In this context, the papers seeks to assess and examines the impact of foreign Institutional Investors on the Indian stock market and the Indian economic growth and relatively finds their advantages, disadvantages and study the relationship between foreign institutional investors and trends in the Indian stock market. The study also examine the trends and changing patterns of financial market after globalization, and also ascertain the impact of domestic financial policy variables on the foreign institutional investors.
Tags: Foreign institutional investors and Indian capital market, Role of foreign institutional investors, Impact of foreign institutional investors, Indian foreign institutional investors, Duties of foreign institutional investors
[...] The research methodology for this dissertation is case study methodology and the research is largely dependent on interview because foreign institutional investment impact is particularly studies in Bombay stock exchange and this would help in better analysing of facts. Secondly articles, journals and magazines information in theory of literature review would be important in setting the kind of questions to be asked for the interview. As there are not many studies done on this topic and not much theory available because foreign institutional investor's power is changed during many intervals, thus there is no fixed theory. [...]
[...] The government which tried to modernise the equity market in the past resulted in pressure from foreign institutional investors , this shows the level of impact they hold on decision of the government as well) for example foreign institutional investors came in India only when paperless trading took place because foreign institutional investors ( Foreign institutional investors were scared of fake shares and frauds, therefore SEBI( Security Exchange Board of India) introduced Demat system through which share transfer process faster ,simpler and gave a sense of security to foreign institutional investors . [...]
[...] In a common sense way, the impact of foreign institutional investors upon the cost of equity capital may be visualised by asking what stock prices would be if there were no foreign institutional investors operating in India, required rate of return for equity reduces, stock prices increase, and Indian firms are fostered by investment only when foreign institutional investors investment reduces. India's Balance of Payments is balanced Increasing domestic investment over and beyond domestic saving through capital flows will help in growing of country like India which is still developing. [...]
[...] Till now the role of Foreign Institutional Investors can be said positive and they are having a good impact on the Indian stock market. Suniel Vichare Well, its very difficult to judge what exactly could happen if Foreign Institutional Investors are not monitored properly, it could affect the working of Indian stock exchange, small investors would be the most affected and on the bigger side if we see the foreign money which must be flowing in most be flowing out of the country and could impact the Indian economy on larger side. [...]
[...] Several analysis methods can be utilized to examine the impact of foreign institutional investors on the Indian stock exchange. BIBLIOGRAPHY: Acharya, and Shankar; (2002); ‘India's medium- term growth prospects' Economic and political weekly, Economic Times July 2002 Agarwal, R.N; (1997) ‘Foreign Portfolio Investment in Some Developing Countries: A Study of Determinants and Macro Economic Impact', the Indian Economic Review, Department of Economics, Delhi School of Economics, Vol Issue. 2nd July, PG: 217-219 Agarwal, (2007) funds behind upward trend' Economic Times 30th September 2007, New Delhi, Available at : http://economictimes.indiatimes.com/articleshow/2415537.cms [ Accessed on 25 March 2008] Bailjal, V;(2005) Report of the expert group on encouraging FII flows and checking the vulnerability of Capital markets to speculative flows' Government of India, Ministry of Finance, department of economic affairs, New Delhi. [...]
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