Adil Langoo

7/31/2019 Adil Langoo

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IN THE FULFILLMENT OF THE REQUIREMENT FOR

THE MASTERS DEGREE IN FINANCE AND CONTROL

(Executive Investment Department)

Submitted By:

MOHAMMAD ADIL LANGOO

MFC III Semester

Roll No: 314

Submitted To:

Department of Business & Financial Studies

University of Kashmir


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Central Treasury Department

Corporate Headquarters

Dalgate, Srinagar

_________________________________________________________________

This is to certify that Mr. MOHAMMAD ADIL LANGOO, S/O Gh. Mohammad

langoo, roll number 314 of MFC 3rd Semester, Department of business &

Financial studies, university of kashmir, J&K has completed his project on the

topic under the supervision of

undersigned.

During his summer training he proved to be an effective and sincere

student and we wish him all the best in his future endeavor.


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All thanks to Almighty Allah by whose grace I accomplish my project work

project

My sincerely thanks to J&K Bank, an esteemed organization for acknowledging

me to do the project work recognizing my academic performance.

My sincere thanks are to Mr. syed gazanfar (executive investment

department) J&K Bank under whose knowledgeable guidance and patronization

I started my project work.

My sincere thanks to the university of Kashmir and departmentment of

business & financial studies in particular for providing guidance, suggestions

and better placement in the developed corporate world.


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Finally I thank my parents, and other family members who always stood by

my side and gave me a moral and financial support, to, take the advantage

of this golden opportunity in the present competitive and advanced corporate

world.

__________________________________________________________

J&K Bank functions as a universal bank in Jammu & Kashmir and as aspecialized bank in the rest of the country. It is also the only private sector

bank designated as RBIs agent for banking business, and carries out

the banking business of the Central Government, besides collecting central

taxes for CBDT.

J&K Bank follows a two-legged business model whereby it seeks to increase

lending in its home state which results in higher margins despite modest

volumes, and at the same time, seeks to capture niche lending opportunities

on a pan-India basis to build volumes and improve margins.


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J&K Bank operates on the principle of 'socially empowering banking' and seeks

to deliver innovative financial solutions for household, small and medium

enterprises.

The Bank, incorporated in 1938, and is listed on the NSE and the BSE. It

has a track record of uninterrupted profits and dividends for four decades.

The J&K Bank is rated P1+, indicating the highest degree of safety by

Standard & Poor and CRISIL.

J&K Bank has been committed to all the basic tenets of good Corporate Governance well

before the Securities and Exchange Board of India and the Stock Exchanges pursuant to

Clause 49 of the Listing Agreement mandated these. Now, it is our Endeavour to go

beyond the letter of the Corporate Governance codes and apply it innovatively in a more

meaningful manner thereby making it relevant to the organization that is operating in a

specific environment, which is different from the generic Anglo-Saxon one. In line with thevision, J&K Bank wants to use Corporate Governance innovatively in a transitional

economy like Jammu and Kashmir. The Bank wants to use Corporate Governance as an

instrument of economic and social transformation. In due course, we would set our self

targets of social and economic reporting as a part of annual disclosures. This will help us


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conceptualize and contextualize the form and content of Corporate Governance in a

developing state. Given the fact that J&K Bank is and is seen as a great success of

public-private partnership, our Bank as a business is expected to play a role in social

transformation of the economy. This lends urgency to implementation of good governancepractices which go beyond the Corporate Governance code. Operating in an environment

that is emerging from a situation of civil strife, the issue of Corporate Governance

assumes a different and greater relevance. We, as the prime corporation of Jammu and

Kashmir, have a vested interest in making the state a safe place for business. J&K Bank

has a key role to play in providing public and private services, financial infrastructure and

employment. As such, the efficiency and accountability of the corporation is a matter of

both private and public interest, and governance, therefore, comes at the top of the

agenda. The fact that the bank is state owned but professionally managed, having a large

size of international investors, governance is critical. For us Corporate Governance is

concerned with the systems of laws, regulations, and practices, which will promote

enterprise, ensure accountability and trigger performance. The J&K Bank, for one, stands

for being more accountable, practice self-policing and make financial transactions

transparent and constitutional. Of our directors to make J&K Bank an engine of social

transformation. As an eminent corporate jurist (Chancellor William T. Allen) from US

says, A corporate director has civic responsibility. The people, who accept this

responsibility, do it conscientiously and well deserve our respect as they are serving a

nation. But those who as directors are passive and view their role as mere advisers, are

pliable and pleasant but do not insist on a real monitors role, do small service to anyone

and deserve little respect. Our directors belong to the former category.


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Tocatalyze economic transformation and capitalizeon growth.

Our vision is to engender and catalyze economic transformation of Jammu

and Kashmir and capitalize from the growth induced financial prosperity thus

engineered. The Bank aspires to make Jammu and Kashmir the most

prosperous state in the country, by helping create a new financial

architecture for the J&K economy, at the center of which will be the J&K

Bank.

Our mission is two-fold: To provide the people of J&K international quality

financial service and solutions and to be a super-specialist bank in the rest of

the country. The two together will make us the most profitable Bank in the

country.


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Jammu and Kashmir Bank Limited was incorporated on 1st October, 1938

and commenced its business from 4th July, 1939 at in Kashmir (India). The

Bank was first in the country as a State owned bank. According to the

extended Central laws of the state, Jammu & Kashmir Bank was defined as a

govt. Company as per the provision of Indian companies act 1956. In the

year 1971, the Bank received the status of scheduled bank. It was declared as

"A" Class Bank by RBI in 1976. Today the bank has more than 500 branches

across the country and has recently become a billion Dollar Company.

1. Incorporated in 1938 as a limited company.

2.Governed by the Companies Act and Banking Regulation Act of India.

3.Regulated by the Reserve Bank of India and SEBI.


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4.Listed on the National Stock Exchange (NSE) and Bombay Stock

Exchange (BSE)

5.53 per cent owned by the Government of J&K.

6.Rated "P1+" by Standard and Poor- CRISIL connoting highest degree of

safety.

7.Four decades of uninterrupted profitability and dividends.

1. Private sector Bank despite government holding 53 per cent of equity.

2.Plan and non -plan funds, taxes and non-tax revenues routed through

the bank.

3.Salaries of Government officials disbursed by the Bank.


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4.Only private sector bank designated as agent of RBI for banking.

5.Carries out banking business of the Central Government.

6.Collects taxes pertaining to Central Board of Direct Taxes in J & K.

Mushtaq Ahmad -- Chairman & CEO

Sudhanshu Panday

Hari Narayan Iyer

Muhammad Ibrahim Shahdaad

Vikrant kuthalia

Prof. Nisar Ali


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A.M.Mattoo

Rakesh kumar Gupta

Nithal Garware

J&K Banks Board plays a pivotal role in ensuring good governance. Its style

of functioning is democratic. The members of the board have always had complete

freedom to express their opinion and decisions are taken on the basis of a consensus

arrived at after detailed discussion. The members are also free to bring up any

matter for discussion at the board meetings with the permission of the Chairman.

The day-to-day management of the Company is conducted by the Chairman and

C.E.O. subject to the supervision and control of the Board of the Directors. The

functions performed by the Board of the Bank for efficient and effective utilization

of resources at their disposal to achieve the goals, visualized, interalia, include

Setting Corporate Missions, Laying down Corporate Philosophy, Formulation of

Strategic and other Business Plans, Laying down of Control Measures and

Compliance with Laws and Regulations.


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FII is defined as an institution organized outside of India for the purpose of making

investments into the Indian securities market under the regulations prescribed by SEBI.

FII include Overseas pension funds, mutual funds, investment trust, asset management

company, nominee company, bank, institutional portfolio manager, university funds,endowments, foundations, charitable trusts, charitable societies, a trustee or power of

attorney holder incorporated or established outside India proposing to make proprietary

investments or investments on behalf of a broad-based fund. FIIs can invest their own

funds as well as invest on behalf of their overseas clients registered as such with SEBI.

These client accounts that the FII manages are known as sub-accounts. A domestic

portfolio manager can also register itself as an FII to manage the. funds of sub-accounts

Foreign institutional investor means an entity established or incorporated outside India

which proposes to make investment in India. Positive tidings about the Indian economy

combined with a fast-growing market have made India an attractive destination for foreign

institutional investors. FII is defined as an institution organized outside of India for the

purpose of making investments into the Indian securities market under the regulations

prescribed by SEBI.

A foreign company planning to set up business operations in India has the following

options:

Incorporated Entity

By incorporating a company under the Companies Act, 1956 through

Joint Ventures; or

Wholly Owned Subsidiaries

Foreign equity in such Indian companies can be up to 100% depending on the requirements


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of the investor, subject to equity caps in respect of the area of activities under the

Foreign Direct Investment (FDI) policy.

Sub-account includes those foreign corporations, foreign individuals, and institutions, funds

or portfolios established or incorporated outside India on whose behalf investments are

proposed to be made in India by a FII.

Designated Bank means any bank in India which has been authorized by the Reserve Bank

of India to act as a banker to FII.

Domestic Custodian means any entity registered with SEBI to carry on the activity of

providing custodial services in respect of securities.


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Broad Based Fund means a fund established or incorporated outside India, which has at

least twenty investors with no single individual investor holding more than 10% shares or

units of the fund. Provided that if the fund has institutional investor(s) it shall not be

necessary for the fund to have twenty investors.

If the fund has an institutional investor holding more than 10% of shares or units in the

fund, then the institutional investor must itself be broad based fund.

Following entities / funds are eligible to get registered as FII:

Pension Funds

Mutual Funds

Investment Trust

Insurance or reinsurancecompanies

Investment Trusts

Banks

Endowments

University Funds

Foundations

Charitable Trusts or Charitable Societies


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Further, following entities proposing to invest on behalf of broad based funds, are also

eligible to be registered as FIIs:

Asset Management Companies

Institutional Portfolio Managers

Trustees

Power of Attorney Holders.

As per Regulation 6 of SEBI (FII) Regulations,1995, Foreign Institutional Investors are

required to fulfill the following conditions to qualify for grant of registration:

Applicant should have track record, professional competence, financial soundness,

experience, general reputation of fairness and integrity.

The applicant should be regulated by an appropriate foreign regulatory authority in the

same capacity/category where registration is sought from SEBI. Registration with

authorities, which are responsible for incorporation, is not adequate to qualify as Foreign

Institutional Investor.

The applicant is required to have the permission under the provisions of the Foreign

Exchange Management Act, 1999 from the Reserve Bank of India.


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Applicant must be legally permitted to invest in securities outside the country or itsin-

corporation / establishment.

The applicant must be a "fit and proper" person.

The applicant has to appoint a local custodian and enter into an agreement with the

custodian. Besides it also has to appoint a designated bank to route its transactions.

Payment of registration fee of US $ 5,000.00

"Form A" as prescribed in SEBI (FII) Regulations, 1995 is to be filled before applying for

FII registration.

Application in Form A duly signed by the authorized signatory of the applicant.

Certified copy of the relevant clauses or articles of the Memorandum and Articles of

Association or the agreement authorizing the applicant to invest on behalf of its clients

Audited financial statements and annual reports for the last one year , provided that

the period covered shall not be less than twelve months.

A declaration by the applicant with registration number and other particulars in support

of its registration or regulation by a Securities Commission or Self Regulatory Organisation


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or any other appropriate regulatory authority with whom the applicant is registered in its

home country.

A declaration by the applicant that it has entered into a custodian agreement with a

domestic custodian together with particulars of the domestic custodian.

A signed declaration statement that appears at the end of the Form.

Declaration regarding fit & proper entity.

The fee for registration as FII is US $ 5,000. The mode of payment is Demand Draft in

favor of "Securities and Exchange Board of India" payable at New York.

SEBI generally takes 7 working days in granting FII registration. However, in cases where

the information furnished by the applicants is incomplete, seven days shall be counted

from the days when all necessary information sought, reaches SEBI.

In cases where the applicant is bank and subsidiary of a bank, SEBI seeks comments from

the Reserve Bank of India (RBI). In such cases, 7 working days would be counted from the

day no objection is received from RBI.

The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to

be renewed.

Same as initial registration, Along with "Form A" and all the relevant documents, the

applicants are required to fill in additional form (Annexure 1) while applying for renewal.

US $ 5,000 needs to be paid for renewal of FII registration.

The application for renewal should be submitted three months before expiry of the FII

registration. 100 % debt FIIs are debt dedicated FIIs which invest in debt securities only.

The procedure for registration of FII/sub-account, under 100% debt route is similar to


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that of normal funds besides a clear statement by the applicant that it wishes to be

registered as FII/sub-account under 100% debt route.

Securities and Exchange Board of India

Division of FII & Custodian

Mittal Court "B" Wing, First Floor

224, Nariman Point

Mumbai 400 021

India.

a) Institution or funds or portfolios established outside India, whether incorporated or

not.

b) Proprietary fund of FII.

c) Foreign Corporates.

d) Foreign Individuals.

The FII should apply on the behalf of the Sub-account. Both the FII and the Sub-accountare required to sign the Sub-account application form.

"Annexure B" to "Form A" (FII application form) needs to be filled when applying for sub-

account registration. No document is needed to be sent with annexure B. The fee for sub-

account registration is US$ 1,000. The fee is to be submitted at the time of submitting


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the application. The mode of payment is Demand Draft in the name of "Securities and

Exchange Board of India" payable at New York. SEBI generally takes three working days in

granting FII registration. However, in cases where the information furnished by the

applicants is incomplete, three days shall be counted from the days when all necessaryinformation sought, reaches SEBI. The validity of sub-account registration is co-terminus

with the FII registration under which it is registered. The process of renewal of sub-

account is same as initial registration. Renewal fee in this case is US $ 1,000. OCBs /

NRIs are not permitted to get registered as FII/sub-account.

If a registered FII/sub-account undergoes name change, then the FII need to promptly

inform SEBI about the change. It should also mention the reasons for the name change

and give an undertaking that there has been no change in beneficiary ownership.

In case of name change of FII, the request should be accompanied with documents from

home regulator and registrar of the company evidencing approval of name change, and the

original FII registration certificate issued by SEBI should be sent back for necessary

amendment.

The FII to whom the Sub-account is proposed to be transferred has to send a request

along with a declaration that it is authorized to invest on behalf of the Sub-account. The

transferor FII should also submit a No-objection certificate.

The FII should send a request, along with no-objection certificate from existing domestic

custodian, for change in domestic custodian.


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The FII would be required to send a request for cancellation of its registration or

registration of its Sub-account/s clearly mentioning the name and registration number of

the entity. The FII should ensure that it / Sub-account has nil cash / securities holdings.

In case of change of the local custodian of the FII / sub-account, the change should be

intimated to SEBI by the FII. On receipt of no objection from the existing custodian and

acceptance from the proposed custodian, the change of custodian would be approved - by

SEBI.

The procedure for registration of FII/sub account under 100% debt route is similar to

that of normal funds besides a clear statement by the applicant that it wishes to be

registered as FII/sub account under 100% debt route. However, Government of India

allocates the overall investment limit for 100% debt funds annually. The grant of

investment limit for individual 100% debt funds is within this overall limit. The funds have

to seek further investment limit in case the limit allotted to them is exhausted and they

wish to invest further.

A Foreign Institutional Investor having an account with one custodian can open accounts

with different custodians for its different sub-accounts. However, one sub-account cannot

be custodial with more than one custodian.


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In case if a registered sub-account wishes to get itself registered as a Foreign Institutional

Investor, then it will have to apply in Form A to SEBI for the same and has to satisfy all

the eligibility criteria norms mentioned in SEBI (Foreign Institutional Investor) Regulations,

1995. It should also submit a letter from the old FII indicating its 'No-objection' to suchregistration.

They have to apply before 3 months of the expiry of registration in Form A. Circular No

FITTC/CUST/09/2000 dated September 21, 2000 may be referred.

The registration of the FII / Sub-account would get expired at due date and it would not

be allowed to trade in Indian securities markets. If it is not interested in renewal but has

certain residual assets, it can apply for disinvestment in terms of Circular No.

FITTC/CUST/12/2001 dated June 04, 2001 and abides by the guidelines specified in this

regard.

FIIs, under the Portfolio Investment Scheme, are permitted to make both primary and

secondary investments in the India capital markets. Unlike an investor which relies solely

on FDI regulations, a foreign investor which registers as a FII would be allowed to buy and

sell securities over Indian stock exchanges. In addition, FIIs are entitled to effect


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transactions in a broader category of securities than an investor relying on FDI regulations

alone. FIIs are permitted to purchase equity securities (both listed and unlisted), units of

schemes floated by the Unit Trust of India and other domestic municipal funds, warrants,

debentures, bonds, governmental securities and derivative instruments which are traded ona recognized stock exchange. There is no limit on the amount that FIIs may invest in the

Indian market, and no lock-up periods apply to investments made by FIIs.

FIIs are required to open up one or more bank accounts with certain designated banks and

must also appoint a domestic custodian for custody of investment made by the FII.

Through the designated accounts, FIIs are authorized to freely transfer funds from foreign

currency accounts to Rupee accounts and vice versa; make Rupee denominated investments

in Indian companies; freely transfer after-tax proceeds from Rupee accounts to foreign

currency accounts, and repatriate capital, capital gain, dividends interest income and other

gains, subject to deduction for applicable withholding taxes. So long as FIIs execute

purchases and sales on a recognized Indian stock exchange, they are not required to obtain

transaction specific approval from the Reserve Bank. FIIs are also entitled to effect

transactions using their own proprietary funds, or the funds of their sub accounts.

Certain limitations apply to investments by FIIs into India. First, FIIs and their sub-

accounts investment in an Indian company can not exceed ten percent (10%) of the total

issued share capital of the Indian company (five percent if the subaccount is a foreign


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corporation or individual). In addition, the aggregate investment of all FIIs in an Indian

company may not exceed twenty four percent (24%) of its total issued share capital,

without the express approval of its board of directors and shareholders. Even with board

of director and shareholder approval, the same sectoral limits which apply to foreign directinvestment would continue to apply. FIIs may register with SEBI as a debt fund or an

equity fund. FIIs which are registered as equity funds, are required to invest at least

seventy percent (70%) of their funds in equity and equity-related securities. A FII

registered as a debt fund, on the other hand, must invest one hundred percent (100%)

of its funds in debt instruments. Foreign corporations and individuals are not eligible

subaccounts of a FII that is registered as a debt fund. FIIs are not permitted to engage in

short selling, other than in respect of derivative securities traded over a recognized

exchange, and must effect transactions through a registered stock broker. Sector

investment prohibitions and caps which apply to foreign direct investment also apply to

investments by FIIs, and FII investments must also comply with the pricing requirements

applicable to foreign direct investment. In addition, FIIs are not permitted to invest in

print media.

In 2004, FIIinvestments crossed $9 billion, the highest in the history of Indian capital

markets.

The total net investment for the year up to December 29 stood at US$9,072 million

while foreign investors pumped in about US$2,113 million in December.

Korea andTaiwan have always been the biggest recipients of FII money. It was only in

2004 that India managed to receive the second highest FII inflow at over $8.5bn.

In 2005 FIIs invested more in Indian equities than in Korean or Taiwanese equities.


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On 9th March 2009, India's exceptional growth story and its booming economy have

made the country a favorite destination with foreign institutional investors (FIIs). It has

continued to attract investment despite the Satyam non-governance issue and the global

economic contagion impact on Indian markets. According toMr. Gautama Chand, CEO of Instanex, said FIIs are the largest institutional

investors in India with holdings valued at over US$ 751.14 billion as on December 31,

2008.

They are also the most successful portfolio investors in India with 102 per cent

appreciation since September 30, 2003.

As per SEBI, number of registered FIIs stood at 1726 and number of registered sub-

accounts stood at 5472 as on March 17, 2012.

Daily Trends in FII Investments on 18-APR-2012

ReportingDate

Debt/EquityInvestment

Route

GrossPurchases(Rs

Crore)

GrossSales(Rs

Crore)

Net Investment(Rs Crore)

Net InvestmentUS($) million

Conversion(1 USD TO

INR)*

18-APR-2012

Equity

StockExchange

2406.90 1965.90 441.00 85.42

Rs.51.6265

Primary market& others

0.60 50.20 (49.60) (9.62)

Sub-total 2407.50 2016.10 391.40 75.8

Debt

StockExchange

184.00 534.80 (350.80) (67.96)

Primary market& others

0.00 0.00 0.00 0

Sub-total 184.00 534.80 (350.80) (67.95)

Total 2591.50 2550.90 40.60 7.85

Sustaining the growth momentum and achieving an annual average growth of 9-10 % in

the next five years.


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Simplifying procedures and relaxing entry barriers for business activities and Providing

investor friendly laws and tax system.

Checking the growth of population; India is the second highest populated country in the

world after China. However in terms of density India exceeds China, as India's land area is

almost half of China's total land. Due to a high population growth, GNI per capita remains

very poor. It was only $ 2880 in 2003 (World Bank figures).

Boosting agricultural growth through diversification and development of agro processing.

Expanding industry fast, by at least 10% per year to integrate not only the surplus labour

in agriculture but also the unprecedented number of women and teenagers joining the

labour force every year.

Developing world-class infrastructure for sustaining growth in all the sectors of the

economy

Allowing foreign investment in more areas.

Effecting fiscal consolidation and eliminating the revenue deficit through revenue

enhancement and expenditure management.

Global corporations are responsible for global warming, the depletion of natural resources,

and the production of harmful chemicals and the destruction of organic agriculture.


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The government should reduce its budget deficit through proper pricing mechanisms and

better direction of subsidies. It should develop infrastructure with what Finance Minister P

Chidambaram International Research Journal of Finance and Economics - Issue 5 (2011) 171

of India called ruthless efficiency and reduce bureaucracy by streamlining governmentprocedures to make them more transparent and effective.

Empowering the population through universal education and health care, India must

maximize the benefits of its youthful demographics and turn itself into the knowledge hub

of the world through the application of information and communications technology (ICT)

in all aspects of Indian life although, the government is committed to furthering economic

reforms and developing basic infrastructure to improve lives of the rural poor and boost

economic performance. Government had reduced its controls on foreign trade and

investment in some areas and has indicated more liberalization in civil aviation, telecom

and insurance sector in the future.


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The working of stock exchanges in India started in 1875. BSE is the oldest stock market

in India. The history of Indian stock trading starts with 318 persons taking membership in

Native Share and Stock Brokers Association, which we now know by the name Bombay

Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the

Government of India. National Stock Exchange comes second to BSE in terms of

popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The

history of Indian stock market is almost the same as the history of BSE.

The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is compiled

based on the performance of the stocks of 30 financially sound benchmark companies. In1990 the BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and

4000 figures in 1992. The reason for such huge surge in the stock market was the liberal

financial policies announced by the then financial minister Dr. Man Mohan Singh.

The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It came to


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public knowledge that Mr. Mehta, also known as the big-bull of Indian stock market

diverted huge funds from banks through fraudulent means. He played with 270 million

shares of about 90 companies. Millions of small-scale investors became victims to the

fraud as the Sensex fell flat shedding 570 points.To prevent such frauds, the Government formed The Securities and Exchange Board of

India, through an Act in 1992. SEBI is the statutory body that controls and regulates

the functioning of stock exchanges, brokers, sub-brokers, portfolio managers investment

advisors etc. SEBI oblige several rigid measures to protect the interest of investors. Now

with the inception of online trading and daily settlements the chances for a fraud is nil,

says top officials of SEBI.

Sensex crossed the 5000 mark in 1999 and the 6000 mark in 2000. The 7000 mark

was crossed in June and the 8000 mark on September 8 in 2005. Many foreign

institutional investors (FII) are investing in Indian stock markets on a very large scale. The

liberal economic policies pursued by successive Governments attracted foreign institutional

investors to a large scale.

The unpredictable behavior of the market gave it a taga volatile market. The factors

that affected the market in the past were good monsoon, Bharatiya Janatha Partys rise

to power etc. The result of a cricket match between India and Pakistan also affected the

movements in Indian stock market. The National Democratic Alliance led by BJP, during

2004 public elections unsuccessfully tried to ride on the market sentiments to power.

NDA was voted out of power and the sensex recorded the biggest fall in a day amidst

fears that the Congress-Communist coalition would stall economic reforms. Later prime

minister Man Mohan Singhs assurance of reforms with a human face cast off the fears

and market reacted sharply to touch the highest ever mark of 8500.

India, after United States hosts the largest number of listed companies. Global investors

now ardently seek India as their preferred location for investment. Once viewed with

skepticism, stock market now appeals to middle class Indians also. Many Indians working in

foreign countries now divert their savings to stocks. This recent phenomenon is the result

of opening up of online trading and diminished interest rates from banks. The stockbrokers


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based in India are opening offices in different countries mainly to cater the needs of Non

Resident Indians. The time factor also works for the NRIs. They can buy or sell stock

online after returning from their work places.

The recent incidents that led to growing interest among Indian middle class are the initialpublic offers announced by Tata Consultancy Services, Maruti Udyog Limited, ONGC and

big names like that. Good monsoons always raise the market sentiments. A good monsoon

means improved agricultural produce and more spending capacity among rural folk.

The bullish run of the stock market can be associated with a steady growth of around 6%

in GDP, the growth of Indian companies to MNCs, large potential of growth in the fields

of telecommunication, mass media, education, tourism and IT sectors backed by economic

reforms ensure that Indian stock market continues its bull run.

Stock markets refer to a market place where investors can buy and sell stocks. The price

at which each buying and selling transaction takes is determined by the market forces (i.e.

demand and supply for a particular stock.

Let us take an example for a better understanding of how market forces determine stock

prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an

upward movement in its stock price. More and more people would want to buy this stock

(i.e. high demand) and very few people will want to sell this stock at current market

price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to

match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On

the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for

the stock of ABC Co. Ltd. in the market, its price will fall down.


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In earlier times, buyers and sellers used to assemble at stock exchanges to make a

transaction but now with the dawn of IT, most of the operations are done electronically

and the stock markets have become almost paperless. Now investors dont have to gather

at the Exchanges, and can trade freely from their home or office over the phone orthrough Internet.

One of the oldest stock markets in Asia, the Indian Stock Markets has a 200 years old

history.

18th Century East India Company was the dominant institution and by end of the

century, busuness in its loan securities gained full momentum

1830's Business on corporate stocks and shares in Bank and Cotton presses started in

Bombay. Trading list by the end of 1839 got broader

1840's Recognition from banks and merchants to about half a dozen brokers

1850's Rapid development of commercial enterprise saw brokerage business attracting more

people into the business

1860's The number of brokers increased to 60

1860-61 The American Civil War broke out which caused a stoppage of cotton supply from

United States of America; marking the beginning of the "Share Mania" in India

1862-63 The number of brokers increased to about 200 to 250

1865 A disastrous slump began at the end of the American Civil War (as an example,

Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87).

The depression witnessed after the Independence led to closure of a lot of exchanges in

the country. Lahore Stock Exchange was closed down after the partition of India, andlater on merged with the Delhi Stock Exchange. Bangalore Stock Exchange Limited was

registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in

a miserable state till 1957 when they applied for recognition under Securities Contracts

(Regulations) Act, 1956. The Exchanges that were recognized under the Act were:


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1. Bombay

2. Calcutta

3. Madras

4. Ahmadabad5. Delhi

6. Hyderabad

7. Bangalore

8. Bombay

9. Calcutta

10. Madras

11. Ahmadabad

12. Delhi

13. Hyderabad

14. Bangalore

15. Indore

Many more stock exchanges were established during 1980's, namely:

Cochin Stock Exchange (1980)

Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982)

Pune Stock Exchange Limited (1982)

LudhianaStock Exchange Association Limited (1983)

Gauhati Stock Exchange Limited (1984)

Kanara Stock Exchange Limited (at Mangalore, 1985)

Magadh Stock Exchange Association (at Patna, 1986)

Jaipur Stock Exchange Limited (1989)

Bhubaneswar Stock Exchange Association Limited (1989)

Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989)

Vadodara Stock Exchange Limited (at Baroda, 1990)


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Coimbatore Stock Exchange

Meerut Stock Exchange

Traditionally, trading in Stock Exchanges in India followed a conventional style where people

used to gather at the Exchange and bids and offers were made by open outcry.

This age-old trading mechanism in the Indian stock markets used to create much functional

inefficiency. Lack of liquidity and transparency, long settlement periods and benami

transactions are a few examples that adversely affected investors. In order to overcome

these inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956.

OTCEI is the first screen based nationwide stock exchange in India created by Unit Trust

of India, Industrial Credit and Investment Corporation of India, Industrial Development

Bank of India, SBI Capital Markets, Industrial Finance Corporation of India, General

Insurance Corporation and its subsidiaries and Can Bank Financial Services.

Greater liquidity and lesser risk of intermediary charges due to widely spread trading

mechanism across India

The screen-based scrip less trading ensures transparency and accuracy of prices

Faster settlement and transfer process as compared to other exchanges

Shorter allotment procedure (in case of a new issue) than other exchanges


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In order to lift the Indian stock market trading system on par with the international

standards. On the basis of the recommendations of high powered Pherwani Committee,

the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of

India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporationof India, all Insurance Corporations, selected commercial banks and others.

NSE provides exposure to investors in two types of markets, namely:

1. Wholesale debt market

2. Capital market

Wholesale Debt Market - Similar to money market operations, debt market operations

involve institutional investors and corporate bodies entering into transactions of high value

in financial instruments like treasury bills, government securities, etc.

Trading at NSE

fully automated screen-based trading mechanism

strictly follows the principle of an order-driven market

Trading members are linked through a communication network

this network allows them to execute trade from their offices

the prices at which the buyer and seller are willing to transact will appear on the

screen.

When the prices match the transaction will be completed, a confirmation slip will be

printed at the office of the trading member.

Advantages of trading at NSE

Integrated network for trading in stock market of India


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fully automated screen based system that provides higher degree of transparency

Investors can transact from any part of the country at uniform prices

Greater functional efficiency supportedby totally computerized network

A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by

governments, finance institutions, corporate houses etc., meet and where trading of these

corporate securities take place.

A Mutual fund is a trust that pools the saving of a number of investors who share a

common financial goal.

This category refers to international investment in which the investor obtains a lasting

interest in an enterprise in another country. Most concretely, it may take the form of

buying or constructing a factory in a foreign country or adding improvements to such a

facility, in the form of property, plants or equipment.

An investor or investment fund that isfrom of or registered in a country outside of the

one in which it is currently investing. Foreign institutional investors have made a sizableinvestment in Indian financial markets. There are currently about 1324 FIIs registered in

India.


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FPI is a category of investment instruments that are more easily traded, may be less

permanent, and do not represent a controlling stake in an enterprise. These include

investments via equity instruments (stocks) or debt (bonds) of a foreign enterprise that

does not necessarily represent a long-term interest.

A Bull market is a market that is consistently going up. It is a market where there is

optimism of further rise batter, business results and other positive factors. Bull Market

can sometimes continue for years, for investors this is the preferred market trend.

However no bull market can continue for very long.

Bear Market is a market that is showing a persistent downtrend. A 15-20% downward

movement of the market generally termed as a bear market.

diversification is the technique of investing in unrelated business sectors simultaneous so

that risk that affects a particular sector does not affect your overall investment. For

example your portfolio of share includes sectors like Information Technology, Real estate

capital Goods, Autos etc.

Exchange rate of a nation's currency- Currency like other commodities rises or falls in

"price" with demand. When investors leave, they sell their holdings in a country's currency

and as demand falls, the "price" of that currency will also fall

Produces are often able to enjoy considerable production cost savings by buying inputs in

bulk, mass-producing or retailing their end product. These lower costs achieved through

expanded production are called Economies of Scale.

The debt/equity ratio measures the extent to which a firm's capital is provided by lenders

(through debt instruments such as fixed-return bonds) or owners (through variable-return

stocks). A greater reliance on financing through debt can mean greater profitability for

shareholders, but also greater risk in the event things go sour.


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An organization whose primary purpose is to invest its own assets or those held in trust

by it for others. Includes pension funds, investment companies, insurance companies,

universities and banks.

Interest rates have a powerful effect on the volume of a nation's money supply. By raising

interest rates, i.e., making the cost of borrowing money more expensive, governments or

banks can decrease the money supply. A decrease in the money supply tends to be

counter-inflationary, which makes a currency more valuable compared to other currencies.

The phrase "most favored nation" refers to the obligation of the country receiving the

investment to give that investment the same treatment as it gives to investments from

its "most favored" trading partner.

-The Balance of Payments (BOP) is a statistical statement that summarizes, for a specific

period (typically a year or quarter), the economic transactions of an economy with the

rest of the world. It covers: All the goods, services, factor income and current transfers

an economy receives from or provides to the rest of the world Capital transfers and

changes in an economy's external financial claims and liabilities

covers the acquisition and disposal of equity and debt securities that cannot be classified

under direct investment or reserve asset transactions. These securities are tradable in

organized financial markets.

Through direct investment flows the investors builds up a direct investment stock

(position), making part of the investors balance sheet. The FDIstock (position) normally

differs from accumulated flows because of revaluation (changes in prices or exchange rates)


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and other adjustments like rescheduling or cancellation of loans, debt forgiveness or debt-

equity swaps with different values.

A foreign direct investor is an individual, an incorporated or unincorporated public or

private enterprise, a government, a group of related individuals, or a group of related

incorporated and/or unincorporated enterprises which have a direct investment enterprise

that is a subsidiary, associate or branch operating in a country other than the country or

countries of residence of the direct investor or investors.

is the country that receives FDI or FPI from the foreign investor(s).

is the country of origin/residence of the company that invests in the foreign

economy/host economy.

is an incorporated enterprise in the host country in which the foreign investor owns more

than 50 per cent of the shareholders voting power or has the right to appoint or

remove a majority of the members of this enterprises administrative, management or

supervisory body.

comprises of equity in branches and ordinary shares in subsidiaries and associates.

consist of the direct investors share of earnings not distributed asdividends by subsidiaries or associates and earnings of branches not remitted to the direct

investor.


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covers inter-company debt (including short-term loans such as trade credits) between

direct investors and subsidiaries, branches and associates.

For this purpose of studying the impact of Fiis on capital

market, I selected Indias two major indices i.e. Sensex and

S&P CNX Nifty. These two indices, in a way, represent the

picture of Indias stock markets. I also selected the five

industry specific indices of BSE i.e. BSE CD, BSE CG, BSE

FMCG, BSE HC and BSE IT so as to further observe the

effect of FII on particular industry. So this project reveals

the impact of FII on the Indian capital market. There may

be many other factors on which a stock index may depend

i.e.

Government policies, budgets, bullion market, inflation,

economic and political condition of the country, FDI,

Re./Dollar exchange rate etc. But for my study I have

selected only one independent variable i.e. FII. This study

uses the concept of correlation and regression to study therelationship between FII and stock index. The FII started

investing in Indian capital market from September 1992

when the Indian economy was opened up in the same year.


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Their investments include equity only. The sample data of

FIIs investments consists of monthly average.

The objective of my research is to find the relationship between

The FIIs investment and stock index. I have also analyzed the impact of FII on specific

industrial sector indices.

The various BSE indices and S&P CNX Nifty index does not rise with the increase in FIIs

investment.

The various BSE indices and S&P CNX Nifty index rises with the increase in FIIs

investment.

WHAT IS THE IMPACT OF FIIS ON INDIAN CAPITAL MARKET?


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THE VARIOUS INDICES OF BSE & NSE NIFTY RISE WITH THE

INCREASE IN FII INVESTMENT.

For the purpose of study, I selected six indices of BSE i.e. Sensex, BSE CD, BSE CG, BSE

FMCG, BSE HC and BSE IT and one index of NSE i.e. S&P CNX Nifty. The sample data

of FIIs investments consists of the monthly average from January 2008 to September

2011. The data regarding indices of BSE was taken from the site of BSE and BSE

yearbook. I got the data on FIIs investment from Reserve Bank of Indias site. The data

of NSE Nifty index was obtained from the site of national stock exchange. Other financial

sites, newspapers and magazines helped me in collecting the required data

I have taken the monthly closing index of all the indices. For FIIs I have

recorded monthly average of the net investments made by them in the

Indian capital market.


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= Purchases Sales

A simple linear relationship has been shown between two variables using

correlation and regression as the data analysis tools. One variable is dependent

and the other is independent. I have taken FII as the independent variable

while the stock index has been taken as dependent variable. The impact of FII

has been separately analyzed with each of the index. So, correlation and

regression has been separately run between FII and seven indices taking one

index at a time.

If the hypothesis holds good then we can infer that FIIs have significant

impact on the Indian capital market. This will help the investors to decide on

their investments in stocks and shares. If the hypothesis is rejected, or in

other words if the null hypothesis is accepted, then FIIs will have nosignificant impact on the Indian bourses.


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This analysis tool performs linear regression analysis by using the "least

squares" method to fit a line through a set of observations. We can analyze

how a single dependent variable is affected by the values of one or more

independent variables for example, how an athlete's performance is affected

by such factors as age, height, and weight. We can apportion shares in the

performance measure to each of these three factors, based on a set of

performance data, and then use the results to predict the performance of a

new, untested athlete.

This analysis tool and its formulas measure the relationship between two data

sets that are scaled to be independent of the unit of measurement. The


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population correlation calculation returns the covariance of two data sets

divided by the product of their standard deviations. We can use the

Correlation tool to determine whether two ranges of data move together

that is, whether large values of one set are associated with large values of

the other (positive correlation), whether small values of one set are

associated with large values of the other (negative correlation), or whether

values in both sets are unrelated (correlation near zero).

The sample data consists of 105 observations for FII, Sensex and S&P CNX

Nifty starting from January 2008 to September 2011. The sample for other

five indices of BSE consists of 33 observations starting from January 2009

to December 2011. I have taken the monthly closing index of all the indices

and monthly average of net investments made by FII. The FIIs started

investing in Indian capital market from September 1992. The numbers of

scrips under following index are:

30

50


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) 22

49

44

48

42

FII was taken as independent variable. Stock indices were taken as

Dependent variable. The data was taken from various financial sites.

Month Open High Low Close

Jan 09 1,987.03 2,036.85 1,925.38 2,032.69

Feb 09 2,032.15 2,066.93 1,986.06 2,043.26

Mar 09 2,040.49 2,050.37 1,781.73 2,036.24

Apr 09 2,042.36 2,129.00 1,967.22 2,095.00

May 09 2,102.95 2,239.18 2,030.93 2,096.64

Jun 09 2,125.93 2,306.96 2,108.50 2,262.69


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Jul 09 2,280.05 2,748.26 2,244.82 2,738.15

Aug 09 2,744.00 2,747.55 2,436.09 2,553.52

Sep 09 2,553.57 2,615.05 2,493.71 2,575.82

Oct 09 2,583.53 2,867.94 2,566.72 2,808.97

Nov 09 2,800.19 2,940.25 2,706.70 2,872.10

Dec 09 2,879.71 2,906.14 2,735.36 2,791.55

Jan 10 2,802.17 2,880.10 2,707.33 2,725.38

Feb 10 2,736.34 2,790.30 2,646.32 2,662.05

Mar 10 2,683.55 2,892.50 2,679.78 2,831.12

Apr 10 2,844.17 2,919.79 2,819.98 2,877.76

May 10 2,876.58 2,988.59 2,782.28 2,980.55

Jun 10 2,978.08 3,246.26 2,951.53 3,230.23

Jul 10 3,220.40 3,263.80 3,167.90 3,229.86

Aug 10 3,253.58 3,419.91 3,212.07 3,385.07

Sep 10 3,411.01 3,787.10 3,388.13 3,719.54

Oct 10 3,716.91 3,793.93 3,530.16 3,605.10

Nov 10 3,620.89 3,799.69 3,482.93 3,582.71

Dec 10 3,584.84 3,701.55 3,478.23 3,684.12

Jan 11 3,701.64 3,802.64 3,333.52 3,366.20


Jan 09 2,250.13 2,400.35 2,022.25 2,236.51

Feb 09 2,210.54 2,265.85 1,987.81 2,096.17

Mar 09 2,075.97 2,383.06 1,990.08 2,285.68

Apr 09 2,293.67 2,672.37 2,256.56 2,663.35

May 09 2,712.56 3,192.65 2,678.52 2,997.55

Jun 09 3,009.39 3,456.86 3,009.39 3,287.20

Jul 09 3,285.60 3,979.25 3,111.88 3,962.12

Aug 09 3,980.77 4,316.46 3,796.15 4,172.52

Sep 09 4,182.68 4,653.75 4,150.38 4,570.91

Oct 09 4,566.83 4,650.33 4,264.75 4,425.52

Nov 09 4,376.70 4,914.17 4,259.76 4,757.27

Dec 09 4,774.49 5,201.42 4,727.16 5,186.35

Jan 10 5,204.97 5,442.90 4,836.61 4,977.71

Feb 10 4,912.12 5,232.73 4,758.86 5,173.99

Mar 10 5,218.95 5,575.59 5,198.78 5,237.50

Apr 10 5,268.96 5,584.60 5,243.41 5,357.83

May 10 5,302.92 5,361.83 4,897.70 5,174.70

Jun 10 5,164.25 5,467.87 5,092.88 5,319.21

Jul 10 5,285.89 5,562.57 5,202.56 5,474.84

Aug 10 5,489.81 5,707.35 5,321.16 5,375.62

Sep 10 5,390.94 6,097.80 5,387.87 5,947.07

Oct 10 5,960.00 6,369.82 5,937.95 5,992.77

Nov 10 6,023.54 6,252.32 5,868.08 6,094.00

Dec 10 6,069.36 6,845.09 6,069.36 6,824.82

Jan 11 6,831.74 6,921.41 6,294.86 6,371.1


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Jan 09 1,912.62 2,059.58 1,692.99 1,777.84

Feb 09 1,756.61 1,758.72 1,529.74 1,542.67

Mar 09 1,525.79 1,657.90 1,428.75 1,625.45

Apr 09 1,644.92 2,041.81 1,624.30 1,757.58

May 09 1,780.00 2,766.98 1,780.00 2,758.07

Jun 09 2,800.73 3,176.94 2,704.67 2,958.43

Jul 09 2,940.36 3,221.56 2,577.21 3,119.09

Aug 09 3,109.97 3,383.23 2,922.81 3,295.34

Sep 09 3,303.62 3,560.07 3,232.88 3,507.38

Oct 09 3,506.64 3,965.73 3,300.26 3,348.21

Nov 09 3,342.03 3,590.74 3,256.09 3,489.43

Dec 09 3,501.50 3,836.30 3,432.38 3,785.39

Jan 10 3,792.07 4,049.49 3,692.85 3,799.29

Feb 10 3,794.12 4,189.09 3,794.12 4,001.78

Mar 10 4,042.67 4,299.76 4,032.83 4,220.71

Apr 10 4,222.89 4,668.63 4,222.89 4,645.34

May 10 4,655.26 4,774.12 4,366.30 4,502.17

Jun 10 4,498.51 4,796.03 4,350.71 4,735.80

Jul 10 4,729.40 5,391.50 4,699.19 5,294.49

Aug 10 5,303.54 6,005.60 5,303.54 5,669.30

Sep 10 5,690.85 6,476.95 5,690.85 6,293.35

Oct 10 6,301.80 6,729.81 6,191.07 6,544.48

Nov 10 6,544.48 7,369.77 5,949.59 6,434.44

Dec 10 6,434.44 6,652.59 5,598.35 6,356.97


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Jan 11 6,356.97 6,502.78 5,771.55 5,995.67Month Open High Low Close

Jan 09 6,938.11 7,631.63 5,938.15 6,256.61

Feb 09 6,196.20 6,605.46 5,811.73 5,897.92

Mar 09 5,803.18 6,600.10 5,393.91 6,466.03

Apr 09 6,530.16 8,205.15 6,400.19 7,908.75

May 09 8,158.28 12,059.73 8,129.38 11,921.39

Jun 09 12,087.42 13,574.63 11,666.05 12,797.27

Jul 09 12,835.23 13,336.44 10,848.31 12,595.94

Aug 09 12,605.23 13,354.02 11,668.65 13,151.15

Sep 09 13,225.66 13,786.34 12,630.43 13,757.19

Oct 09 13,750.98 14,350.88 12,780.65 12,873.48

Nov 09 12,820.01 13,607.80 12,399.59 13,321.16

Dec 09 13,388.00 14,169.70 13,312.34 14,116.69

Jan 10 14,176.35 14,448.35 12,719.23 13,125.06

Feb 10 13,055.41 13,631.12 12,684.81 13,474.86

Mar 10 13,600.63 14,261.93 13,600.63 14,081.74

Apr 10 14,141.36 14,516.07 13,750.32 14,028.78

May 10 13,954.33 13,976.45 12,998.69 13,657.42

Jun 10 13,651.06 14,842.72 13,379.68 14,710.04

Jul 10 14,654.26 15,429.63 14,435.70 14,591.67

Aug 10 14,674.21 15,022.61 14,443.90 14,524.53

Sep 10 14,559.87 16,153.47 14,513.43 15,995.46

Oct 10 16,088.62 16,595.40 15,572.34 15,818.85

Nov 10 15,889.74 16,860.58 14,580.60 15,055.04

Dec 10 15,068.03 15,723.02 14,816.50 15,415.08

Jan 11 15,470.11 15,551.53 12,988.55 13,526.03


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Month Open High Low ClosePrice/

EarningsPrice/

BookvalueDividend Yield

Jan 09 9,720.55 10,469.72 8,631.60 9,424.24 12.21 2.53 1.88

Feb 09 9,340.37 9,724.87 8,619.22 8,891.61 12.82 2.50 1.89

Mar 09 8,762.88 10,127.09 8,047.17 9,708.50 12.68 2.47 1.92

Apr 09 9,745.77 11,492.10 9,546.29 11,403.25 15.23 2.95 1.68

May 09 11,635.24 14,930.54 11,621.30 14,625.25 17.88 3.35 1.47

Jun 09 14,746.51 15,600.30 14,016.95 14,493.84 19.75 3.64 1.30

Jul 09 14,506.43 15,732.81 13,219.99 15,670.31 19.10 3.53 1.32

Aug 09 15,694.78 16,002.46 14,684.45 15,666.64 20.08 3.73 1.24

Sep 09 15,691.27 17,142.52 15,356.72 17,126.84 21.20 3.95 1.17

Oct 09 17,186.20 17,493.17 15,805.20 15,896.28 21.66 4.06 1.14

Nov 09 15,838.63 17,290.48 15,330.56 16,926.22 21.23 3.99 1.15

Dec 09 16,947.46 17,530.94 16,577.78 17,464.81 21.82 4.10 1.12

Jan 10 17,473.45 17,790.33 15,982.08 16,357.96 21.99 4.11 1.10

Feb 10 16,339.32 16,669.25 15,651.99 16,429.55 19.97 3.65 1.18

Mar 10 16,438.45 17,793.01 16,438.45 17,527.77 21.05 3.85 1.12

Apr 10 17,555.04 18,047.86 17,276.80 17,558.71 21.28 3.88 1.10

May 10 17,536.86 17,536.86 15,960.15 16,944.63 19.96 3.56 1.15

Jun 10 16,942.82 17,919.62 16,318.39 17,700.90 20.57 3.34 1.18

Jul 10 17,679.34 18,237.56 17,395.58 17,868.29 21.20 3.40 1.17

Aug 10 17,911.31 18,475.27 17,819.99 17,971.12 21.61 3.45 1.15

Sep 10 18,027.12 20,267.98 18,027.12 20,069.12 22.99 3.66 1.09

Oct 10 20,094.10 20,854.55 19,768.96 20,032.34 23.89 3.82 1.04

Nov 10 20,272.49 21,108.64 18,954.82 19,521.25 23.03 3.71 1.06

Dec 10 19,529.99 20,552.03 19,074.57 20,509.09 22.93 3.73 1.05

Jan 11 20,621.61 20,664.80 18,038.48 18,327.76 22.00 3.62 1.08


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Jan 09 2,968.04 3,038.28 2,677.59 2,713.84

Feb 09 2,715.24 2,761.52 2,551.99 2,597.00

Mar 09 2,588.33 2,836.04 2,490.86 2,830.11

Apr 09 2,810.30 3,131.27 2,787.70 3,067.98

May 09 3,101.06 3,530.11 3,063.14 3,435.95

Jun 09 3,473.90 3,765.58 3,403.23 3,551.87

Jul 09 3,570.73 3,907.31 3,486.60 3,805.05

Aug 09 3,806.07 3,956.52 3,733.88 3,900.93

Sep 09 3,918.84 4,444.01 3,822.80 4,404.26

Oct 09 4,402.39 4,546.64 4,293.89 4,377.20

Nov 09 4,392.16 4,817.06 4,338.73 4,767.41

Dec 09 4,786.76 5,183.45 4,777.15 5,018.33

Jan 10 5,043.00 5,201.44 4,633.47 4,765.14

Feb 10 4,755.71 4,953.22 4,689.00 4,912.98

Mar 10 4,946.11 5,378.26 4,941.09 5,328.37

Apr 10 5,345.21 5,450.54 5,243.43 5,344.71

May 10 5,331.75 5,501.75 5,196.79 5,490.27

Jun 10 5,488.67 5,816.97 5,423.18 5,748.78

Jul 10 5,752.22 5,792.52 5,582.53 5,597.19


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Date Buy Value Sell Value Net Value

January-2011 57526.07 66429.67 -8,903.60December-2010 52683.49 53405.68 -722.19November-2010 79726.26 74375.39 5,350.87October-2010 77706.1 63318.04 14,388.06September-2010 74920.16 52444.52 22,475.64

August-2010 56120.24 48582.94 7,537.30July-2010 52571.21 44030.15 8,541.06June-2010 51878.01 44164.06 7,713.95May-2010 49588.04 61659.16 -12,071.12April-2010 55061.05 52393.68 2,667.37March-2010 59692.57 44900.24 14,792.33February-2010 39001.43 40944.9 -1,943.47January-2010 56109.18 63325.85 -7,216.67December-2009 45029.99 40789.13 4,240.86

November-2009 48761.93 47053.86 1,708.07October-2009 63964.86 63964.73 0.13September-2009 62872.65 49541.22 13,331.43August-2009 45722.53 49489.56 -3,767.03July-2009 58990.29 60354.89 -1,364.60June-2009 61767.47 61852.61 -85.14May-2009 73016.96 59130.87 13,886.09April-2009 38871.53 33311.43 5,560.10March-2009 31646.9 32330.47 -683.57

February-2009 22066.26 24899.69 -2,833.43January-2009 28447.81 33620.63 -5,172.82December-2008 29362.68 28327.87 1,034.81November-2008 28093.92 33552.88 -5,458.96October-2008 48413.6 64067.1 -15,653.50September-2008 65932.27 78435.01 -12,502.74August-2008 44460.52 49916.64 -5,456.12July-2008 62050.69 66654.69 -4,604.00June-2008 60693.06 73360.22 -12,667.16

May-2008 58982.92 65678.51 -6,695.59April-2008 59546.97 62083.85 -2,536.88March-2008 68472.59 72236.39 -3,763.80February-2008 64267.47 68318.59 -4,051.12January-2008 97579.5 127027.01 -29,447.51


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The effect of FII on Nifty is positive. But the co- efficient of correlation islow so the effect is less. The standard error comes out to be 221.1which is

high. This does not mean the relation is false but we can say that the error

in linear relation is high.

The effect of FII on Sensex is negative. So, FII is inversely related to Sensex.But the co-efficient of correlation is very low so the effect is very less. The

standard error comes out to be 319578.2which is very high. This means that

the deviation from the mean value is high. This does not mean the relation is

false but we can say that the error in linear relation is high. The value of

multiple-R is also very less. We can say that FII did not have any significant

impact on Sensex during the period .

BSE CD is inversely related to FII for the period under study. But the

extent of impact is very- very low as co-efficient of correlation is -0.011.


56/59

FII has no significant relation with BSE HC, as the value of correlation is

0.003. This does not mean that there is no relation at all between them.It shows the absence of linear relation between the two variables but not a

lack of relationship altogether.

BSE FMCG is inversely related to FII for the period under study. But the

value of R is low so the degree of relation is low. Standard error in this case

is 130.6which is less compared to other standard errors between FII and

other stock indices.

BSE CG is also negatively correlated with FII. In this case again the degree of

relation is less.

BSE IT is positively correlated with FII for the period under study. The value

of correlation is 0.236.


57/59


58/59

According to findings and results, It has been concluded

that FII did not have any significant impact on the Indian

capital market. Therefore, the null hypothesis is accepted.

BSE IT and Nifty showed some positive correlation but rest

of the index showed negative correlation with FII. Also the

degree of relation was less in all the case. It shows the

absence of linear relation between FII and stock index. This

does not mean that there is no relationship between them.

One of the reasons for absence of any linear relation can

also be due to the sample data. The data was taken on

monthly basis. The data on daily basis can give more positive

results (may be). Also FII is not the only factor affecting

the stock indices. There are other major factors that

influence the Courses in the stock market.


59/59

BIBLIOGRAPHY

www.bseindia.com

www.nseindia.com

www.rbi.org.in

www.equitymaster.com

www.etintelligence.com

Www. Moneycontrol.com

www.economic times.com

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