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FDI AND FII IN INDIA

SUBMITTED BY:

Priyanka Parija

Academy of Management Studies 2

 INTRODUCTION

The FDI and FII is the process by which the resident of one country (the source
country) acquire the ownership of assets for the purpose of controlling the production,
distribution and other productive activities of a firm in another country(the host
country).
According to the international monetary fund (IMF), FDI and FII is defined as “an
investment that is made to acquire a lasting interest in an enterprise operating in an
economy other than that of investor”.
The effect of foreign investment, however, varies from country to country. It can
affect the factor productivity of the recipient country and can also affect the balance
of payments. Foreign investment provides a channel through which countries can gain
access to foreign capital. It can come in two forms: FDI and foreign institutional
investment (FII). Foreign direct investment involves in direct production activities
and is also of a medium- to long-term nature. But foreign institutional investment is a
short-term investment, mostly in the financial markets. FII, given its short-term
nature, can have bidirectional causation with the returns of other domestic financial
markets such as money markets, stock markets, and foreign exchange markets. Hence,
understanding the determinants of FII is very important for any emerging economy as
FII exerts a larger impact on the domestic financial markets in the short run and a real
impact in the long run. India, being a capital scarce country, has taken many measures
to attract foreign investment since the beginning of reforms in 1991.

India is the second largest country in the world, with a population of over 1 billion
people. As a developing country, India’s economy is characterized by wage rates that
are significantly lower than those in most developed countries. These two traits
combine to make India a natural destination for FDI and foreign institutional
investment (FII). Until recently, however, India has attracted only a small share of
global FDI and FII primarily due to government restrictions on foreign involvement in
the economy. But beginning in 1991 and accelerating rapidly since 2000, India has
liberalized its investment regulations and actively encouraged new foreign

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investment, a sharp reversal from decades of discouraging economic integration with
the global economy.

The world is increasingly becoming interdependent. Goods and services followed by

the financial transaction are moving across the borders. In fact, the world has become
a borderless world. With the globalization of the various markets, international
financial flows have so far been in excess for the goods and services among the
trading countries of the world. Of the different types of financial inflows, the FDI and
foreign institutional investment (FII)) has played an important role in the process of
development of many economies. Further many developing countries consider FDI
and FII as an important element in their development strategy among the various
forms of foreign assistance.
The FDI and FII flows are usually preferred over the other form of external finance,
because they are not debt creating, nonvolatile in nature and their returns depend upon
the projects financed by the investor. The FDI and FII would also facilitate
international trade and transfer of knowledge, skills and technology.
The government of India (GOI) has also recognized the key role of the FDI and FII in
its process of economic development, not only as an addition to its own domestic
capital but also as an important source of technology and other global trade practices.
In order to attract the required amount of FDI and FII it has bought about a number of
changes in its economic policies and has put in its practice a liberal and more
transparent FDI and FII policy with a view to attract more FDI and FII inflows into its
economy. These changes have heralded the liberalization era of the FDI and FII
policy regime into India and have brought about a structural breakthrough in the
volume of FDI and FII inflows in the economy. In this context, this report is going to
analyze the trends and patterns of FDI and FII flows into India during the post
liberalization period that is 2006 to 2009 year.

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 OBJECTIVES

 Examines the trends and patterns in the FDI across different sectors and from
different countries in India during 2000 to 2009.
 Influence of FII on movement of Indian stock exchange during period that is
September 2006 to September 2009.
 To understand the FII & FDI policy in India.

Academy of Management Studies 5

 METHODOLOGY

In order to accomplish this project successfully we will take following steps.

Data collection:

Secondary Data: Internet, newspapers, journals and books, other reports and projects,
literatures
FDI:
The study is limited to a sample of top 10 investing countries e.g. Mauritius,
Singapore, USA etc. and top 10 sectors e.g. service sector, computer hardware and
software, telecommunications etc. which had attracted larger inflow of FDI from
different countries.
FII:
 Correlation: We have used the Correlation tool to determine whether two
ranges of data move together — that is, how the Sensex, Bankex, IT, Power
and Capital Goods are related to the FII which may be positive relation,
negative relation or no relation.

We will use this model for understanding the relationship between FII and
stock indices returns. FII is taken as independent variable. Stock indices are
taken as dependent variable

 Hypothesis Test: If the hypothesis holds good then we can infer that FIIs
have significant impact on the Indian capital market. This will help the
investors to decide on their investments in stocks and shares. If the hypothesis
is rejected, or in other words if the null hypothesis is accepted, then FIIs will
have no significant impact on the Indian bourses.

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 FOREIGN DIRECT INVESTMENT

In this section we are going to discuss or describe the main business of the report i.e.
analysis of secondary data. It includes data in an organized form, discussion on its
significance and analyzing the results. For this we had divided this section in further
two subsections i.e. the first subsection fulfill the requirement of first objective which
is pertaining to FDI.

Objective 1: Examine the trends and patterns in the FDI across different sectors
and from different countries in India during 2000 to 2009.

I. About foreign direct investment.

Is the process whereby residents of one country (the source country) acquire
ownership of assets for the purpose of controlling the production, distribution, and
other activities of a firm in another country (the host country). The international
monetary fund’s balance of payment manual defines FDI as an investment that is
made to acquire a lasting interest in an enterprise operating in an economy other than
that of the investor. The investors’ purpose being to have an effective voice in the
management of the enterprise’. The united nations 1999 world investment report
defines FDI as ‘an investment involving a long term relationship and reflecting a
lasting interest and control of a resident entity in one economy (foreign direct investor
or parent enterprise) in an enterprise resident in an economy other than that of the
foreign direct investor ( FDI enterprise, affiliate enterprise or foreign affiliate).

II. Foreign direct investment: Indian scenario

FDI is permitted as under the following forms of investments –
· Through financial collaborations.
· Through joint ventures and technical collaborations.
· Through capital markets via Euro issues.
· Through private placements or preferential allotments.

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Forbidden Territories:

 Arms and ammunition

 Atomic Energy
 Coal and lignite
 Rail Transport
 Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold,
diamonds, copper, zinc.

Foreign Investment through GDRs (Euro Issues) –

Indian companies are allowed to raise equity capital in the international market
through the issue of Global Depository Receipt (GDRs). GDR investments are treated
as FDI and are designated in dollars and are not subject to any ceilings on investment.
An applicant company seeking Government's approval in this regard should have
consistent track record for good performance (financial or otherwise) for a minimum
period of 3 years. This condition would be relaxed for infrastructure projects such as
power generation, telecommunication, petroleum exploration and refining, ports,
airports and roads.

1. Clearance from FIPB –

There is no restriction on the number of Euro-issue to be floated by a company or a
group of companies in the financial year. A company engaged in the manufacture of
items covered under Annex-III of the New Industrial Policy whose direct foreign
investment after a proposed Euro issue is likely to exceed 51% or which is
implementing a project not contained in Annex-III, would need to obtain prior FIPB
clearance before seeking final approval from Ministry of Finance.

2. Use of GDRs –
The proceeds of the GDRs can be used for financing capital goods imports, capital
expenditure including domestic purchase/installation of plant, equipment and building
and investment in software development, prepayment or scheduled repayment of
earlier external borrowings, and equity investment in JV/WOSs in India.

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 III. Foreign direct investments in India are approved through
two routes –
1. Automatic approval by RBI –
The Reserve Bank of India accords automatic approval within a period of two weeks
(subject to compliance of norms) to all proposals and permits foreign equity up to
24%; 50%; 51%; 74% and 100% is allowed depending on the category of industries
and the sectoral caps applicable. The lists are comprehensive and cover most
industries of interest to foreign companies. Investments in high priority industries or
for trading companies primarily engaged in exporting are given almost automatic
approval by the RBI.

2. The FIPB Route – Processing of non-automatic approval cases –

FIPB stands for Foreign Investment Promotion Board which approves all other cases
where the parameters of automatic approval are not met. Normal processing time is 4
to 6 weeks. Its approach is liberal for all sectors and all types of proposals, and
rejections are few. It is not necessary for foreign investors to have a local partner,
even when the foreign investor wishes to hold less than the entire equity of the
company. The portion of the equity not proposed to be held by the foreign investor
can be offered to the public.

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 iii. Analysis of sector specific policy for FDI

Sr. No. Sector/Activity FDI cap/Equity Entry/Route

1. Hotel & Tourism 100% Automatic
2. NBFC 49% Automatic
3. Insurance 26% Automatic
4. Telecommunication: Automatic
cellular, value added services 49%
ISPs with gateways, radio- Above 49% need
paging 74% Govt. licence
Electronic Mail & Voice Mail 100%
5. Trading companies:
primarily export activities 51% Automatic
bulk imports, cash and carry
wholesale trading 100% Automatic
6. Power(other than atomic
reactor power plants) 100% Automatic
7. Drugs & Pharmaceuticals  100% Automatic
8. Roads, Highways, Ports and 100% Automatic
Harbors
9. Pollution Control and 100% Automatic
Management
10 Call Centers 100% Automatic
11. BPO 100% Automatic
12. For NRI's and OCB's: 

i. 34 High
100% Automatic
Priority Industry
Groups
ii. Export Trading
Companies
iii. Hotels and
Tourism-related
Projects
iv. Hospitals,
Diagnostic Centers

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 v. Shipping
vi. Deep Sea
Fishing
vii. Oil Exploration
viii. Power
ix. Housing and
Real Estate
Development
x. Highways,
Bridges and Ports
xi. Sick Industrial
Units
xii. Industries
Requiring Compulsory
Licensing
xiii. Industries
Reserved for Small
Scale Sector

13. Airports:
Greenfield projects 100% Automatic
Existing projects 100% Beyond 74% FIPB
14 Assets reconstruction 49% FIPB
company
15. Cigars and cigarettes 100% FIPB
16. Courier services 100% FIPB
17. Investing companies in 49% FIPB
infrastructure (other than
telecom sector)

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 iv. Analysis of FDI inflow in India
From April 2000 to August 2009
(Amount US$ in Millions)
S.No Financial Year Total FDI % Growth Over
Inflows Previous Year
1. 2000-01 4,029 ----
2. 2001-02 6,130 (+) 52
3. 2002-03 5,035 (-) 18
4. 2003-04 4,322 (-) 14
5. 2004-05 6,051 (+) 40
6. 2005-06 8,961 (+) 48
7. 2006-07 22,826 (+) 146
8. 2007-08 34,362 (+) 51
9. 2008-09 35,168 (+) 02
10. 2009-10( Up to August 16,232 ----
2009)

TOTAL FDI INFLOWS

40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-
01 02 03 04 05 06 07 08 09 10

TOTAL FDI INFLOWS

v. Analysis of share of top ten investing countries FDI equity

in flows

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 From April 2000 to August 2009
(Amount in Millions)
Sr. No Country Amount of FDI Inflows % As To
Total FDI
Inflow
1. Mauritius 19,18,633.61 44.01
2. Singapore 3,80,142.56 8.72
3. U.S.A. 3,32,935.60 7.64
4. U.K. 2,40,974.98 5.53
5. Netherlands 1,78,047.76 4.08
6. Japan 1,50,129.05 3.44
7. Cyprus 1,32,448.04 3.04
8. Germany 1,12,242.06 2.57
9. France 61,686.39 1.42
10. U.A.E. 50,915.59 1.17

Mauritius
Mauritius invested Rs.19,18,633 million in India Up to the August 2009, equal to
44.01 percent of total FDI inflows. Many companies based outside of India utilize
Mauritian holding companies to take advantage of the India- Mauritius Double
Taxation Avoidance Agreement (DTAA). The DTAA allows foreign firms to bypass
Indian capital gains taxes, and may allow some India-based firms to avoid paying
certain taxes through a process known as “round tripping.”

The extent of round tripping by Indian companies through Mauritius is unknown.

However, the Indian government is concerned enough about this problem to have
asked the government of Mauritius to set up a joint monitoring mechanism to study
these investment flows. The potential loss of tax revenue is of particular concern to
the Indian government. These are the sectors which attracting more FDI from
Mauritius Electrical equipment Gypsum and cement products Telecommunications
Services sector that includes both non- financial and financial Fuels.
Singapore
Singapore continues to be the single largest investor in India amongst the Singapore
with FDI inflows into Rs. 3,80,142 crores up to August 2009.
Sector-wise distribution of FDI inflows received from Singapore the highest inflows
have been in the services sector (financial and non financial), which accounts for

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about 30% of FDI inflows from Singapore. Petroleum and natural gas occupies the
second place followed by computer software and hardware, mining and construction.

U.S.A.
The United States is the third largest source of FDI in India (7.64 % of the total),
valued at 732335 crore in cumulative inflows up to August 2009. According to the
Indian government, the top sectors attracting FDI from the United States to India are
fuel, telecommunications, electrical equipment, food processing, and services.
According to the available M&A data, the two top sectors attracting FDI inflows from
the United States are computer systems design and programming and manufacturing

U.K.
The United Kingdom is the fourth largest source of FDI in India (5.53 % of the total),
valued at 2,40,974 crores in cumulative inflows up to August 2009.
Over 17 UK companies under the aegis of the Nuclear Industry Association of UK
have tied up with Ficci to identify joint venture and FDI possibilities in the civil
nuclear energy sector.
UK companies and policy makers the focus sectors for joint ventures, partnerships,
and trade are non-conventional energy, IT, precision engineering, medical equipment,
infrastructure equipment, and creative industries.

Netherlands
FDI from Netherlands to India has increased at a very fast pace over the last few
years. Netherlands ranks fifth among all the countries that make investments in India.
The total flow of FDI from Netherlands to India came to Rs. 1, 78,047 crores between
1991 and 2002. The total percentage of FDI from Netherlands to India stood at 4.08%
out of the total foreign direct investment in the country up to August 2009.

Following Various industries attracting FDI from Netherlands to India are:

 Food processing industries

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  Telecommunications that includes services of cellular mobile, basic telephone,
and radio paging
 Horticulture
 Electrical equipment that includes computer software and electronics
 Service sector that includes non- financial and financial services

vi. Analysis of sectors attracting highest FDI equity inflows

From April 2000 to August 2009
(Amount in Millions)
Sr. No Country Amount of FDI % As To
Inflows Total FDI
Inflow
1. Service Sector 9,65,210.77 22.14

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 (Financial & Non Financial)
2. Computer Software & Hardware 4,13,419.03 9.48
3. Telecommunication 3,68,899.62 8.46
4. Housing & Real Estate 3,25,021.36 7.46
5. Construction Activities 2,65,492.96 6.09
6. Automobile Industry 1,90,172.22 4.36
7. Power 1,79,849.92 4.13
8. Metallurgical Industries 1,25,785.57 2.89
9. Petroleum & Natural Gas 1,11,957.00 2.57
10. Chemical 1,01,680.18 2.33

The sectors receiving the largest shares of total FDI inflows up to August 2009 were
the service sector and computer software and hardware sector, each accounting for
22.14 and 9.48 percent respectively. These were followed by the telecommunications,
real estate, construction and automobile sectors. The top sectors attracting FDI into
India via M&A activity were manufacturing; information; and professional, scientific,
and technical services. These sectors correspond closely with the sectors identified by
the Indian government as attracting the largest shares of FDI inflows overall.

The ASSOCHAM has revealed that FDI in Chemicals sector (other than fertilizers)
registered maximum growth of 227 per cent during April 2008 – March 2009 as
compared to 11.71 per cent during the last fiscal. The sector attracted USD 749
million FDI in FY ‘09 as compared to USD 229 million in FY ’08.

During the year 2009 government had raised the FDI limit in telecom sector from 49
per cent to 74 per, which has contributed to the robust growth of FDI. The telecom
sector registered a growth of 103 per cent during fiscal 2008-09 as compared to
previous fiscal. The sector attracted USD 2558 million FDI in FY ‘09 as compared to
the USD 1261 million in FY ’08, acquired 9.37 per cent share in total FDI inflow.

India automobile sector has been able to record 70 per cent growth in foreign
investment. The FDI inflow in automobile sector has increased from USD 675 million
to 1,152 million in FY ’09 over FY ’08.

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The other sectors which registered growth in highest FDI inflow during April – March
2009 were housing & real estate (28.55 per cent), computer software & hardware
(18.94 per cent), construction activities including road & highways (16.35 per cent)
and power (1.86 per cent).

FOREIGN INSTITUTIONAL INVESTMENT

Objective 2: Influence of FII on movement of Indian stock exchange during the

post liberalization period that is September 2006 to September 2009.

I. Introduction to FII
Since 1990-91, the Government of India embarked on liberalization and economic
reforms with a view of bringing about rapid and substantial economic growth and
move towards globalization of the economy. As a part of the reforms process, the

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Government under its New Industrial Policy revamped its foreign investment policy
recognizing the growing importance of foreign direct investment as an instrument of
technology transfer, augmentation of foreign exchange reserves and globalization of
the Indian economy. Simultaneously, the Government, for the first time, permitted
portfolio investments from abroad by foreign institutional investors in the Indian
capital market. The entry of FIIs seems to be a follow up of the recommendation of
the Narsimhan Committee Report on Financial System. While recommending their
entry, the Committee, however did not elaborate on the objectives of the suggested
policy. The committee only suggested that the capital market should be gradually
opened up to foreign portfolio investments.

From September 14, 1992 with suitable restrictions, FIIs were permitted to invest in
all the securities traded on the primary and secondary markets, including shares,
debentures and warrants issued by companies which were listed or were to be listed
on the Stock Exchanges in India. While presenting the Budget for 1992-93, the then
Finance Minister Dr. Manmohan Singh had announced a proposal to allow reputed
foreign investors, such as Pension Funds etc., to invest in Indian capital market.

II. Market design in India for foreign institutional investors

Foreign Institutional Investors means an institution established or incorporated
outside India which proposes to make investment in India in securities. A Working
Group for Streamlining of the Procedures relating to FIIs, constituted in April, 2003,
inter alia, recommended streamlining of SEBI registration procedure, and suggested
that dual approval process of SEBI and RBI be changed to a single approval process
of SEBI. This recommendation was implemented in December 2003.

Currently, entities eligible to invest under the FII route are as follows:

i) As FII: Overseas pension funds, mutual funds, investment trust, asset

management company, nominee company, bank, institutional portfolio
manager, university funds, endowments, foundations, charitable trusts,
charitable societies, a trustee or power of attorney holder incorporated or
established outside India proposing to make proprietary investments or

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 with no single investor holding more than 10 per cent of the shares or units
of the fund.
ii) As Sub-accounts: The sub account is generally the underlying fund on
whose behalf the FII invests. The following entities are eligible to be
registered as sub-accounts, viz. partnership firms, private company, public
company, pension fund, investment trust, and individuals.

FIIs registered with SEBI fall under the following categories:

a) Regular FIIs- those who are required to invest not less than 70 % of their
investment in equity-related instruments and 30 % in non-equity instruments.

b) 100 % debt-fund FIIs- those who are permitted to invest only in debt instruments.

The Government guidelines for FII of 1992 allowed, inter-alia, entities such as asset
management companies, nominee companies and incorporated/institutional portfolio
managers or their power of attorney holders (providing discretionary and non-
discretionary portfolio management services) to be registered as FIIs. While the
guidelines did not have a specific provision regarding clients, in the application form
the details of clients on whose behalf investments were being made were sought.

While granting registration to the FII, permission was also granted for making
investments in the names of such clients. Asset management companies/portfolio
managers are basically in the business of managing funds and investing them on
behalf of their funds/clients. Hence, the intention of the guidelines was to allow these
categories of investors to invest funds in India on behalf of their 'clients'. These
'clients' later came to be known as sub-accounts. The broad strategy consisted of
having a wide variety of clients, including individuals, intermediated through
institutional investors, who would be registered as FIIs in India. FIIs are eligible to
purchase shares and convertible debentures issued by Indian companies under the
Portfolio Investment Scheme.

iii. Prohibitions on Investments:

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FIIs are not permitted to invest in equity issued by an Asset Reconstruction Company.
They are also not allowed to invest in any company which is engaged or proposes to
engage in the following activities:

1) Business of chit fund

2) Nidhi Company
3) Agricultural or plantation activities
4) Real estate business or construction of farm houses (real estate business does not
include development of townships, construction of residential/commercial premises,
roads or bridges).
5) Trading in Transferable Development Rights (TDRs).

iv. Trends of Foreign Institutional Investments in India.

Portfolio investments in India include investments in American Depository Receipts

(ADRs)/ Global Depository Receipts (GDRs), Foreign Institutional Investments and
investments in offshore funds. Before 1992, only Non-Resident Indians (NRIs) and
Overseas Corporate Bodies were allowed to undertake portfolio investments in India.
Thereafter, the Indian stock markets were opened up for direct participation by FIIs.
They were allowed to invest in all the securities traded on the primary and the
secondary market including the equity and other securities/instruments of companies
listed/to be listed on stock exchanges in India. It can be observed from the table below
that India is one of the preferred investment destinations for FIIs over the years. As of
March 2009, there were 1609 FIIs registered with SEBI.
SEBI Registered FIIs in India
Year End of March
1992-93 0
1993-94 3
1994-95 156
1995-96 353
1996-97 439
1997-98 496
1998-99 450
1999-00 506
2000-01 527
2001-02 490

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 2002-03 502
2003-04 540
2004-05 685
2005-06 882
2006-07 996
2007-08 1279
2008-09 1609

v. FII trend in India

Year Gross Gross Sales (b) Net % increase
Purchases (Rs.crore) Investment in FII inflow
(a) (Rs. crore) (a-b)
(Rs. crore)
1992-93 17 4 13 -
1993-94 5593 466 5127 39338.46
1994-95 7631 2835 4796 -6.45
1995-96 9694 2752 6942 44.75
1996-97 15554 6979 8575 23.52
1997-98 18695 12737 5958 -30.52
1998-99 16115 17699 1584 126.59
1999-00 56856 46734 10122 739.02
2000-01 74051 64116 9935 -1.85
2001-02 49920 41165 8755 -11.88
2002-03 47061 44373 2688 69.30
2003-04 144858 99094 45764 1602.53
2004-05 16953 171072 45881 0.26
2005-06 346978 305512 41466 -9.62
2006-07 520508 489667 30841 -25.62
2007-08 896686 844504 52182 69.20
2008-09 548876 594608 -45732 187.64

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 FII INFLOW
1000000 Gross
Purchase
800000 s (a)
(Rs.crore
600000 )
Gross
Sales (b)
400000 (Rs.crore
)
200000 Net
Investme
0 nt (a-b)
(Rs.crore
)
-200000
3 4 8 9 0 3 4 7 8 9
2 -9 3 -9 -9 5 -9 6 -9 7 7 -9 8 -9 9 -0 -0 1 -0 2 2 -0 3 -0 -0 5 -0 6 6 -0 7 -0 8 -0
9 9 94 95 96 9 9 9 00 01 0 0 04 05 0 0 0
19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20

There may be many other factors on which a stock index may depend i.e. Government
policies, budgets, bullion market, inflation, economic and political condition of the
country, FDI, Re./Dollar exchange rate etc. But for my study I have selected only one
independent variable i.e. FII and dependent variable is indices of nifty.

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 vi. Co – relation with Indices

Indices Co-relation with FII

Sensex 0.80
Bankex 0.18
Power 0.33
IT 0.13
Capital Goods 0.44

From the above table we can say that FII has a positive impact on all the indices
which means that if FIIs come in India then it is goods for the Indian economy. FIIs
have more co-relation with Sensex so we can say that they are mostly invest in big
and reputed companies which are included in Sensex.

Power and Capital Goods sector have more co-relation with FII investment which
shows more interest of FIIs in those sectors.

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 vii. Hypothesis Test

VAR00003 VAR00004
VAR00003 Pearson Correlation 1 .801**
Sig. (2-tailed) .000
N 35 35
**
VAR00004 Pearson Correlation .801 1
Sig. (2-tailed) .000
N 35 36
**. Correlation is significant at the 0.01 level (2-tailed).

Here the correlation 0.8 which shows that both have positive relation if FII increase
then Sensex will also increase. But if we compare the significance with the degree of
freedom then null hypothesis is accepted because (0.00<0.01) so it shows that FIIs
will have no significant impact on the Sensex.

CONCLUSION

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Objective 1:

A large number of changes that were introduced in the country’s regulatory economic
policies heralded the liberalization era of the FDI policy regime in India and brought
about a structural breakthrough in the volume of the FDI inflows into the economy
maintained a fluctuating and unsteady trend during the study period. It might be of
interest to note that more than 50% of the total FDI inflows received by India during
the period from 2000 - 2009 came from Mauritius, Singapore and the USA. The main
reason for higher levels of investment from Mauritius was that the fact that India
entered into a double taxation avoidance agreement (DTAA) with Mauritius were
protected from taxation in India. Among the different sectors, the service sector had
received the larger proportion followed by computer software and hardware sector
and telecommunication sector.

Objective 2:

According to findings and results, we have concluded that FII did have significant
impact on Sensex but there is less co-relation with Bankex and IT.

One of the reasons for high degree of any linear relation can also be due to the sample
data. The data was taken on monthly basis. The data on daily basis can give more
positive results (may be). Also FII is not the only factor affecting the stock indices.
There are other major factors that influence the bourses in the stock market.

BIBLIOGRAPHY

Academy of Management Studies 25

Sites
http://dipp.nic.in
www.bseindia.com
www.financeexpress.com
www.tradechakra.com
www.madaan.com
www.indianembassy.com
www.sebi.gov.in

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