Global integration, the widening and intensifying of links between high-income and developing countries has accelerated over the years. Over the past few years, the financial markets have become increasingly global. The Indian market has gained from foreign inflows through the investment of Foreign Institutional Investors (FIIs). Following the implementation of reforms in the securities industry in the past few years, Indian stock markets have stood out in the world ranking. During the past few years India has emerged as one of the world’s fastest growing economies. The increasing interest of foreign players in the domestic broking industry is a testimony of the stock market’s growth. The Indian stock market has also received a thrust from rise in business transactions over the years, because of sharp drop in brokerage fees and transaction costs, launch of a slew of new products, and a robust regulatory environment. The importance of institutional investors’ particularly foreign investors is very much evident as one of the routine reasons offered by market analysts’ whenever the market rises, it is attributed to foreign investors' money and no wonder we see headlines like "FIIs Fuel Rally" etc., in the business press. This is not unusual with India alone as today’s most developed economies might have seen a similar trend in the past. Domestic institutional investors on the other hand being another important section of institutional investors are playing a vital role in the Indian stock market. These investors have emerged as important players in the Indian stock market and their activities are influencing the market. There are many instances where this section of investors has stabilized the market conditions on one hand whereas their moves took the market to destabilized position on the other hand. Therefore, both FIIs and DIIs have become the most important determinants in the functioning of the Indian stock market. Thus, increasing role of these institutional investors has brought both quantitative and qualitative developments in the stock market viz., expansion of securities business, increased depth and breadth of the market, and above all their dominant investment philosophy of emphasizing the fundamentals has rendered efficient pricing of the stocks. Hence, there is a need to examine how investments made by these two groups of institutional investors’ impact each other as well as stock market returns. This book is an attempt in that direction.

An attempt is made in this paper to analyze and compare the different institutional investors' investments in the Indian stock market. The chief categories of institutional investors considered in the study are Foreign Portfolio Investors (FIIs), Domestic institutional investors (DIIs) and Participatory Note investors (PNIs). The results of the study indicate that DIIs are negatively correlated with both PNIs and FIIs while there is a positive correlation between FIIs and PNIs. Further both FII and P-Note investors' behavior is alike and they are predominantly short-term return seeking investors and fundamental factors are not found to be significantly explaining the changes in these inflows. The INR-USD exchange rate appeared to be the chief determinant of the PNIs and PNIs Granger causes FIIs. However in the case of domestic institutional investments are not influenced by the exchange rate. Further DIIs are not Granger caused by P-Note investments and FII investments. Therefore, it can be concluded that not all institutional investors act alike and the presence of DIIs in Indian market appears to be providing a kind of stability that is much needed in case of a sudden flight of foreign investments triggered by global events.

Since the 1990s, one of the major forces changing the face and structure of international capital markets has been the flow of cross-border portfolio investments, especially by Foreign Institutional Investors (FIIs) from developed countries to the developing economies. Portfolio investors provide institutional character to the capital markets, flavored by highly intensive research and diversified investments. FIIs are specialized financial intermediaries managing savings collectively on behalf of investors, especially small investors, towards specific objectives in terms of risks, returns, and maturity of claims. FIIs make investments in various countries to provide a measure of portfolio diversification and hedging to their assets. The forces driving the recent change in the investment portfolio of FIIs - as reflected in the growing emphasis on equities of emerging market economies - include, inter alia: (a) increased accessibility of these markets after liberalization, (b) improved marketability, (c) fewer problems relating to thin trading, and (d) improved macroeconomic fundamentals of recipient countries. This book provides a detailed account and examination of various dimensions, determinants, deterrents, and other aspects of investment flows into India through FIIs.

This study examines the dynamic interaction among institutional investment (FII and Mutual Funds) and the stock market returns for India in a three factor vector autoregression (VAR) framework. The data set used in this study are in daily frequency spanning from 1st Jan 2002 to 31st July 2012 and extracted from various sources such as PROWESS database of Center for Monitoring Indian Economy, the official website of Securities and Exchange Board of India (SEBI), Reserve Bank of India Official website and Bombay Stock Exchange. By considering the two types of flows (FIIs and mutual funds net equity investment) to be interdependent and hence form the endogenous part of the VAR system, we find that both mutual fund flows and the FII's fund flows are significantly influences Indian stock market. It is evident that the BSE returns (with lags) are positively influencing FII's flows but it turns to be negative in determining mutual fund investment flows during the study period. We observe similar kind of results after controlling for market fundamentals. The Granger causality analysis signifies a bi-directional causation between the institutional investment and stock market returns. The structural VAR impulse response analysis suggests that the response of Sensex return to both types of institutional investment flows are negligible or insignificant. However, the FII's net investment is positively responding to stock return about up to 3 days, and it is negatively responding to the mutual fund flows. The response of mutual fund net flows to stock return is initially positive but it turns to be negative in the next two days. It responds negatively to the FII net flows.

Capital Markets in India: An Investor's Guide aims to provide the first comprehensive book on investing in the India markets. India is right now at the forefront of globalization. The book's focus is on the equity market, but it also addresses derivatives, fixed income, and foreign direct investments. Chapter topics include facts about the Indian economy; the Foreign Institutional Investor (FII) regulations, registration process, and applications; detail about the market regulation and the regulator; the very important market safeguards built into the Indian market systems; and lists of companies ranked by various criteria such as capitalization, turnover, industry, and earnings. The book even supplies investors and traders with contact information for many of the key institutions and market players. Readers will not only gain basic information about how the markets in India work, but also the contacts and facts to help them with their own investing plan.

Foreign Institutional Investors (FII) and The Indian Stock Market An Economic Study SUMMARY Foreign Institutional Investor (FII) is used to denote an investor - mostly of the form of an institution or entity, which invests money in the financial markets of a country different from the one, where in the institution or entity was originally incorporated. FII investment is frequently referred to as hot money for the reason that it can leave the country at the same speed at which it comes in. In countries like India, statutory agencies like SEBI have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs. Foreign Exchange Management Act (FEMA), norms includes maintenance of highly rated bonds (collateral) with security exchange. Foreign Investment refers to investments made by residents of a country in financial assets and production process of another country. After the opening up of the borders for capital movement these investments have grown in leaps and bounds. But it had varied effects across the countries. It can affect the factor productivity of the recipient country and can also affect the balance of payments.