Relation between fdi and Indian stock market: Special reference to sensex

Foreign Direct Investment (FDI) is an international flow of capital that provides a parent company or multinational organization with control over foreign subsidiaries. Basically, foreign capital flows refer to movement of financial resources from one country to another, thereby enhancing the economic growth and development of the host country. Stock Market is considered to be back bone of the financial system of an economy. The two most dominant stock exchanges in India are Bombay Stock Exchange and National Stock Exchange The current paper makes an attempt to study the relationship and impact of FDI on Indian stock market using statistical measures correlation and regression analysis. Sensex is considered as the representative of stock market as they are the most popular Indian stock market indices. Based on 15 years data starting from 2001 to 2015, it was found that the flow of FDI has significant impact on stock of Indian stock market. Objectives of paper includes too study the trends and patterns of Foreign direct Investment (FDI) time period from 2001 to 2015 and relationship and impact of FDI on Indian stock market with special reference to Sensex. This paper concluded that Value of R is 0.896 indicate that there is strong correlation between FDI and Sensex. Standard error is 2285.69, R square is 0.802 means that 80 percent explained by this model and remaining is explained by unknown factors. Value of d is 1.164 means that there is high degree of auto correlation between FDI and Sensex.