TO STUDY THE FACTORS AFFECTING INVESTMENT BEHAVIOUR OF FOREIGN INSTITUTIONAL INVESTORS

Abstract

Economic policies’ liberalization in 1992 permitted foreign institutional investors (FIIs) to invest in Indian capital markets. Still, FIIs actually began investing in India from 1997 onwards. Moreover, the investment by FIIs saw factual growth only after 2002. Since then, the participation of FIIs in Indian stock market has risen steadily. Having emerged as one of the largest investors, FIIs have acquired non-promoter shares’ ownership of a substantial proportion. Becoming dominant market players in the Indian stock market, FIIs contribute a considerable proportion (41.73%) of the total stock exchange turnover of BSE and NSE put together. In the Indian markets, FIIs are seen as large and sophisticated investors having a considerable impact on stock market returns. A number of investors and market participants steer their stock market strategy in accordance with FII’s investment pattern. They also base their stock market analysis on their perception pertaining to the factors considered by FII in their investment decision. In this context this paper studies perception of market participants about major determinants of FII investment decision and extent to which investors are influenced by FII investment.