Foreign Institutional Investor'S Impact On Stock Prices In India

This paper studies the impact of market opening to FIIs, on Indian stock market behavior. India announced it's policy regarding the opening of stock market to FIIs for investement in equity and related instruments on 14-th September 1992. Using stock market data related to Bombay Stock Exchange, for both before and after the FIIs policy announcement day. An empirical examination has been conducted to assess the impact of the market opening on the returns and volatility of stock return. We found that while there is no significant changes in the Indian stock market average returns, volatility is significantly reduced after India unlocked it's stock market to foreign investors.