A Study of the Impact of FII on the Sectoral Market Indices

One of the major reasons boosting the economic growth of India has been the unparalleled globalization resulting competition and improved innovations. As a result inflow of foreign capital has become a benchmark of economic growth. Foreign Institutional Investors (FIIs) have become mediums of international assimilation and growth incentive. Foreign capital provides domestic markets with improved technology, enhanced products, complimentary services etc. Policy initiatives to attract FII in India have also had diverse impact on the markets. The current paper makes an attempt to study the relationship and impact of FII on the sectoral market indices of the Bombay Stock Exchangeusing simple statistical tools like Correlation coefficient and Granger-Causality test. Based on the last 14 years data from 2001-2014 it was found that FII has significant impact on some of the sectoral indices in India. This has improved opportunities of financial integration enabling the returns from the sectoral indices to be favorable for the investors.