1Phd student, University of Kerala, Department of Commerce, Thriuvananthpuram, Kerala, India-695034
2Assistant professor, Institute of management in Government, Vikas Bhavan P.O, Thriuvananthapuram
3Professor and Head, Department of Commerce, University of Kerala, Karyavatom, Thriuvananthapuram
4Director, Karuakaran Memorial Cooperative College of management Karyavatom, Thriuvananthapuram
5Department of Commerce, School of Business Management & Legal studies University of Kerala Karyavatom, Thriuvananthapuram
6Department of Commerce, School Business of management and Legal studies University of Kerala, Karyavatom, Thriuvananthapuram
7Bachelor of Social Science Social researcher in Local Culture, University of Azad Iran (Sanandaj Branch)
Online published on 28 September, 2013.
Efficient capital markets are essential for economic growth and prosperity. An integral part of capital market is the stock market, the development of which is linked with the country's level of savings, investment and the rate of economic growth. India's stock market has been classified as one of the fastest growing markets. Mumbai Stock Exchange is the biggest and most liquid exchange in India and is a major source of capital formation in India. Local and foreign investor's confidence in the investment environment of India has boosted the stock market index in recent years. The developing countries are witnessing changes in the composition of capital flows in their economies because of the expansion and integration of the world equity market. The stock markets are also experiencing this change. Foreign direct investments (FDIs) are becoming important source of finance in developing countries including India.
The paper investigates the impact of Foreign Direct Investment (FDI) on the stock market development in Automobile industry of India.
For this article I used the secondary data collected in annual reports that published every year by financial section in each industry from 2006 to 2010. In this article I used samples that include 10 automobile industries.
The names of them are:
TATA MOTORS
Mahindra & Mahindra
Bajaj Auto Ltd
Hero Honda Motors Ltd
Maruti Suzuki India Ltd
Exide Industries Ltd
Bosch Ltd
Bharat Forge Ltd
Ashok Leyland Ltd
Motherson Sumi System Ltd.
In this study I used the loglinear modeling specification in fulfillment the objectives of the study to test and examine the impact of foreign direct investment on stock market development. Also in this study, stock market development is measured through market capitalization (MC) as function of foreign direct investment (FDI), GNP per capita (GNPC), inflation (INF) and domestic savings (SAV). Most advanced approach of bounds testing is used to establish the co integration among macroeconomic variables. The ARDL method estimates (p+1)k number of regressions in order to obtain optimal lag length for each variable.
The result of this study showed that the Impact of Foreign Direct Investment on the stock market development in Automobile industry is positive and statistically strong implying that economic growth of the economy is imperative for the development of the stock market of India.
Also this result show that use of FDI in stock market has a positive impact than domestic finance for growth the stock market in any sides.
FDI (Foreign Direct Investment), Stock market, Capital market
