Trend Analysis of FII Flows in India

Abstract

Given the significant and strong association of FII flows with domestic equity market, it is essential to investigate the trend of these flows in India. Therefore in this paper, we have analysed the trend of FII flows in India for the period 1993-94 to 2011-12 by observing the annual data. We have also examined the growth rate of Gross FII flows as well as FII flows in equity and debt market in India using Multiple Regression analysis. The impact of Global Financial Crisis of 2008 on the growth rate of FII flows in India has also been assessed by incorporating a dummy variable for it in the analysis. Results of trend analysis revealed that since 1993 FII flows have always been positive in India except for the years 1998-99 and 2008-09. Growth rate analysis shows that growth rate of FII flows in equity market is more than that of debt market. It also reveals that Global Financial Crisis of 2008 has significantly reduced FII flows in equity market but it leads to positive impact on FII flows in debt market though insignificantly.