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AN ANALYTICAL RESEARCH ON FOREIGN INSTITUTIONAL INVESTMENT IN INDIA

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Author(s): Rachna Arya | Dr. Ashok Purohit

Journal: International Journal of Computer Science and Management Studies
ISSN 2231-5268

Volume: 12;
Issue: 03;
Start page: 111;
Date: 2012;
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Keywords: Sensitivity index | Stock market

ABSTRACT
Foreign institutional investors have gained a significant role in Indian stock markets. The increase in the volume of foreign institutional investment (FII) inflows in recent years has led to concerns regarding the volatility of these flows, threat of capital flight, its impact on the stock markets and influence of changesin regulatory regimes. The dawn of 21st century has shown the real dynamism of stock market and the various benchmarking of sensitivity index (Sensex) in terms of its highest peaks and sudden falls it can be said that while return declined reasonably after the entry of FIIs, the volatility has been reduced significantly after their entry. Besides, FIIs investment flows, there may be other reasons as well that may have some degree of influence on market volatilityand return. While the FIIs investment flows and contemporaneous SENSEX, NIFTY, market capitalization and market turnover have been strongly correlated in India, the correlation between FIIsinvestments and market volatility and market return has been comparatively low. It means volatility in Indian market is not the function of FIIs investment flows. There may be some other reasons which induced the volatility in Indian market over the time.

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