A Study on the Pattern of Sectoral Investments of FIIs in National Stock Exchange

Abstract

Financial and trade liberalization in developing countries led to the integration of international capital markets which resulted in the growth of Foreign Portfolio Investments (FPI). FII investments first started flowing into India in 1993 and portfolio flows have since then been substantial. Since FIIs are investing heavily in Indian stock market, there is a need to understand the impact of FIIs investment on Indian Companies by analysing the change in their shareholding pattern. FIIs shareholding in the stock market is large enough for them to be able to show an impact on the financial market. Cross correlation among twelve sectors in which FIIs invested during 2001-2015 was done and it was found that the investments by FIIs in Nifty stocks across various sectors are strongly correlated which means that they compensate the pullout from one sector by investing in other sectors. This is also proved by a high degree of correlation between FII investments in various sectors from 2001-2015 and the Nifty index for the period.