Abstract

With the radical liberalization in the Foreign Direct Investment (FDI) regime during past years, Indian capital market has been able to attract foreign investors considerably. There has been significant upsurge in the foreign direct investment in India. With this, India has emerged as one of the most favored destination for investment in the world. Since the development and the volatility of the Indian stock market has been substantially influenced by the inflow of FDI. Therefore, the present paper attempts to analyse the impact of FDI inflows on the movement of BSE (Bombay Stock Exchange) SENSEX and NSE (National stock exchange) CNX Nifty during the period under study. The study is primarily based on ten years secondary data for the period from April, 2006 to March, 2016. The Simple Linear Regression (step-wise method), Karl Pearson’s coefficient of correlation, Analysis of Variance, Normal P-P plot, Scatter plot, Histogram, descriptive statistics (Mean & Standard Deviation), Compounded Annual Growth Rate, Trend Percentage etc. are the tools for the analysis of data using the statistical package for social sciences (SPSS). FDI was found significantly correlated with both the markets with the coefficient of correlation being 0.666 and 0.682 respectively. It was further found that FDI has affected BSE SENSEX up to 44 percent and CNX Nifty up to 47 percent. The study concluded that flow of FDI in India has significant impact on BSE SENSEX and NSE Nifty movements. Keeping in view the findings of the study, it has been suggested that the government of India along with its implementing bodies should try to attract more and more FDI for the smooth and rapid development of the stock market and the economy as a whole.