ABSTRACT

                         There are many factors that affect the investment decisions of foreign institutional investors in India. Movement of market indices e.g. Sensex and investment behavior of mutual funds are two important factors that fall in this domain. This research paper is an attempt to analyze the impact of these factors i.e. Sensex and mutual funds on the investment decisions of Foreign Institutional Investors in India. In other word, this study explores whether the movement of two capital market indicators Sensex and Mutual Fund investments affect the investment decisions of Foreign Institutional Investors in India or not. For this purpose the authors have used regression analysis. Very interestingly, the study reveals that Sensex movement does affect the investment decisions of FIIs in India whereas the FIIs do not bother much about mutual funds.

Foreign Institutional Investors (FIIs) play a very important role in Indian stock market. The FIIs bring liquidity, buoyancy and growth in stock markets but at the same time they also inject germs of volatility and instability. Over past few years the stock markets in India have shown an impressive growth. The stock market indices are reaching new heights every day and more and more number of shares is making new highs. Reflecting India’s improving macroeconomic fundamentals, increasing corporate profitability and competitiveness, and greater integration with the world economy, the Foreign Institutional Investors’ (FIIs) participation is continuously increasing in the stock markets of India. In fact, the investments by FIIs in Indian stock markets are growing at a rapid rate.