A Study on the Determinants of Foreign Institutional Investment Inflows into India

FII is an investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. This study intends to evaluate the trends and patterns of FII inflows into India. It also studies the relationship between the selected macroeconomic variables and the FII inflows of India. The study is based on the secondary time series data collected for fifteen years ranging from FY 2000-01 to 2014-15. Index of Industrial Production, exchange rate, inflation, foreign exchange reserves and returns of BSE SENSEX are taken as the determinants of FII inflows for the purpose of this study. The collected data was analysed using Pearson’s correlation analysis, linear regression analysis and compounded annual growth rate. The results revealed that FII inflows exhibited a mixed pattern of inflows and high volatility. The established trend line shows an upward trend for FII inflows. IIP, REER and FER were found to be the determinants of FII inflows, whereas BSE returns and inflation were insignificant determinants. Favourable measures should be taken by the policy makers to improve these variables under study which will resul t in increased foreign institutional investment inflows.