Impact of FIIs Investment on Volatility of Indian Stock Market: An Analysis

Abstract

Foreign Institutional investors (FIIs) are the entities established outside India that are responsible for making investment proposals in India. Foreign Portfolio Investment (FPI) refers to investment made in an economy through the purchase of financial assets, such as bonds, stocks, etc, in a foreign country. The paper focuses on entities that invest in a country's financial market, such as stocks, bonds, and other securities. FIIs can include hedge funds, pension funds, mutual funds, insurance companies, and sovereign wealth funds. Foreign institutional investment is portfolio investment in the stock market by buying shares and debentures in another country by foreign institutions. In India, a particular FII is allowed to invest upto 10% of the paid up capital of a company, which implies that any investment above 10% will be construed as FDI, though officially such a definition did not exist.