Content area
Full text
ABSTRACT
Foreign institutional investment signifies investments made by individual investors or companies in foreign lands. India have been witnessing a surge in FII activity since the opening of its capital markets. Owing to its high growth potential, India has become a favorite destination for FN activity. FIIs, convinced of India's economic progress ad strong corporate earnings, are continuously investing in the country. Fast GDP growth has made India a preferred destination for foreign investors post the 2008 financial crisis. In 2010 itself, India attracted nearly US$30 billion of net foreign inflows, which was just under 50 per cent of all inflows into emerging Asian markets, excluding China. Foreign investors have invested Rs 6,460 crore (US$1.45 billion) in Indian stock markets in just five trading sessions of July 2011 .In the first six months of 2011, overseas investors infused around Rs 17,000 crore (US$3.82 billion) into the Indian market, including stocks and bonds. In the same period, FIIs made investments of Rs 9,948 crore (US$2.23 billion) in the debt market, with investments in stocks being Rs 2,670 crore (US$ 599.79 million).This paper analyses the role ahead for the Foreign Institutional investors in the present Indian economic Scenario with the focus on the impact on the Indian Capital Market.
Introduction
"Few nations have the growth potential that India already enjoys. India holds the promise of most successful future "
...Klaus Schwab, Founder & Chairman, World Economic Forum
Until the 1980s, India's development strategy was focused on self-reliance and import substitution. Current account deficits were financed largely through debt flows and official development assistance. There was a general disinclination towards foreign investment or private commercial flows. The broad approach to reform in the external sector after the Gulf crisis was delineated in the Report of the High Level Committee on Balance of Payments (Chairman: C. Rangarajan). It recommended, inter alia, a compositional shift in capital flows away from debt to non-debt creating flows; strict regulation of external commercial borrowings, especially short-term debt; discouraging volatile elements of flows from non-resident Indians (NRIs); gradual liberalization of outflows; and disintermediation of Government in the flow of external assistance. After the launch of the reforms in the early 1990s, Foreign Institutional Investors [Flls] have been allowed to invest in all...