Abstract:

The growth of the Indian capital market is being fueled by the foreign institutional investors (FII), whose increasing presence is a sign of the advancements made in that industry. Developing nations always strive to enhance their financial markets in the hopes of luring more capital from elsewhere. This has led to new levels of development and increased volatility in the Indian financial markets, which has created an opportunity for fresh research into international institutional investments and the Indian financial market. This study aims to evaluate the impact of international institutional investors' trading activity on the Indian stock market. Our analysis showed that the returns on the Indian stock market have not been much impacted since the market was opened to investors from other nations, but the market's volatility has dramatically decreased. Due to its size, the Indian stock market is a favorite among investors wishing to make investments. The Indian market has attracted an increasing number of domestic as well as foreign investor groups due to its steady growth in recent years. Institutional investors are responsible for the majority of the funds invested in the Indian stock market and among these investors, foreign institutional investors (also known as FIIs) are the most important. The question of whether these Foreign Institutional Investors (FIIs) are responsible for regulating India's capital markets is an important one. This study examines whether market movements are attributed to these investors and what impact they have on capital markets. Due to the short-term nature of FII investments, there can be a two-way causal relationship between FII returns and returns in other domestic financial markets such as financial markets, stock markets and foreign exchange markets

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