Managing fiis inflow in India

Foreign institutional investment (FIIs) which has become synonymous of foreign portfolio investment (FPIs) was first allowed to invest in Indian financial market on 14^th September 1992. Since the time of their initial investment and up to now India has been successfully receiving a handsome chunk of foreign funds from these FIIs. However, FIIs are also known for their aggressive investment strategies and that is why they also known as ‘Hot Capital’. Their sudden withdrawal behaviour can send shivering to the domestic share market. Thus policy makers and academicians have always shown their keen interest to know the factors/determinants which affects to the buying behaviour of these foreign investors. The present research work is an effort to diagnose the interrelationship between FIIs and other macroeconomic variables in order to find the factors affecting FIIs decisions. For the purpose of identifying the probable determinants of FIIs in India the study has applied certain statistical tools such as Multicolinearity testing, time series break analysis, and Correlation analysis. The study has found that BSE Sensex and Market Capitalization of BSE are the significant determinants of FIIs inflow in India.