Foreign investment has become a striking measure of economic development in both developed and developing countries. Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA). Now the developing countries, including India, are witnessing changes in the composition of capital flows in their economies because of the expansion and integration of the world equity market. The flow of foreign capital is playing a significant role in the development of Indian stock markets. Since Indian capital market is vast and hence attract investors as their investment destination. FDI and FII thus have become instruments of international economic integration and stimulation. The flow of FDI and FII is increasingly seen as an important cause of stock market volatility. This state of affairs has propelled researchers to study the extent of relation between foreign capital flows and stock market volatility. In this context, an attempt is made to study the impact of FDI and FII flow on Indian Stock market (BSE Sensex and NSE Nifty). The study covers the time horizon of 10 years from 2005-06 to 2014-15.
FDI, FII, BSE Sensex, NSE Nifty.