Correlation of fdi with gdp, sensex and nifty

Indian financial market has seen an extraordinary volatility in the last few years. Since the year 2002, Indian market has grown from a much volatile condition to growth phenomena, from a SENSEX point of 5500 in December 2003 to 13,787 in December 2006 and crossed the mark of 20,000 in the year 2007 and again in 2013. Due to various reasons, the stock market has also experienced drastic decline to even less than 8,000 points in 2008. It is not because of only the domestic market but also the international investors. There are many other variables which contribute to the positive growth of the stock market. FIIs investment is considered to be one of the biggest push after the economic fundamentals. There is no doubt that the liberalisation of the FII flows into the Indian Capital Market since 1993 has had a considerable impact on Indian stock market. The present paper is an attempt to explore the FDIs investment behaviour and its relationship with GDP, SENSEX and NIFTY movement. Further, an attempt is made to develop an understanding of the dynamics of the trading behaviour of FDIs and effect on the Indian stock market. The study is covers the period, financial year 2000-2001 to 2016-17on GDP, BSE Sensex and Nifty and FII activity. It provides the evidence of significant positive correlation between FDI activity and effects on Indian Capital Market. The analysis also finds that the movements in the Indian Capital Market are fairly explained by the FDI net inflows