Role of FII in Indian stock market.

The growth of institutional investors in the market is having its own advantages as well as its own share of problems on the brighter side almost always purchase stocks on the basis of fundamentals. And this means that it is essential to have information to evaluate, so researchbecomes important and this leads to increasing demands on companies to become more transparent and more disclosures. This will lead to reduction in information asymmetries that plagued the Indian markets for quite a while. Also, the increasing presence of this class of investors leads to reform of securities trading and transaction systems, nurturing of securitiesbrokers, and liquid markets. If we see the numbers of FII flows, It is increasing every year :

On the flip side the increase of foreign investors in particular will bring a very welcome inflow of foreign capital, but there are always some dangers if certain limits are exceeded. Firstly, the foreign capital is free and unpredictable and is always on the look out of profits. Flls frequently move investments, and those swings can be expected to bringsevere price fluctuations resulting in increasing volatility. Here we analyze the comparative trend of sensex and FII, how it affected the market, Here the grey curve shows sensex indeces and black curve shows the FII cash flow, Here we can see how FII cash inflows increases the market indeces and cash outflows decreases the indian stock market indeces:

This is the way FII is supplimenting volatility in Indian market. This is what is happening in current scenerio. Also, increased investment from overseasmay shift control of domestic firms to foreign hands. Which showed us how the Indian market is interdependent on global markets like U.S., Europe and other asian markets. This was the same as happen in current scenerio, U.S. and other market meltdown slotted in direct impact on Indian market. The FII are taking out the money and the impact is shown on current Indian markets.