A Study On Impact of Foreign Institutional Investment On Indian Stock Returns Volatility Using GARCH (1,1) Model

CHAPTER -1
Introduction
1.1 Details of the Firm/ organization :
The organization selected for the project work is National Stock Exchange (NSE) under the
functional area finance. NSE is located in Mumbai, Maharashtra. It was established in 1992
as the first demutualized electronic exchange in the country to provide a modern, fully automated
screen-based electronic trading system which offered easy trading facility to the investors spread
across the length and breadth of the country.
NSE has a market capitalization of more than US$1.65 Trillion, making it the worlds 12 th
largest stock exchange as of 23 January 2015. NSEs flagship index, the CNX Nifty , the 50
stock index, is used extensively by investor in India and around the world as a barometer of the
Indian Capital market.
NSE was set up by a group of leading Indian Financial institutions at the behest of the
government of India to bring transparency to the Indian capital market. Based on the
recommendations laid out by the government committee, NSE has been established with a
diversified shareholding comprising domestic and global investors. The key domestic investors
include Life Insurance Corporation of India, State Bank of India, IFCI Limited IDFC limited and
Stock Holding Corporation of India Limited and the key global investors are Gagil FDI Limited,
GS strategic Investments Limited, SAIF II SE investment Mauritius Limited and PI
Opportunities fund.
NSE offer trading , clearing and settlement services in equity, equity derivatives, debt and
currency derivatives segments. It is the first exchange in India to introduce electronic trading
facility thus connecting together the investment base of the entire country.
NSE has 2500 VSATs and 3000 leased lines spread over more than 2000 cities across India.
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regulation) Act,1956, when P.V. Narasimha
Rao was the prime minister of India and Manmohan Singh was the Finance minister . NSE
commenced operations in the Wholesale Debt Market(WDM) segment in june 1994. The capital
Market (equities) segment of the NSE commenced Operations in November 1994, while
operations in the derivative segment commenced in june 2000.
National Stock Exchange is one of the stock market which acts as a key place in the circulation
of currency where high volatility is maintained. From the data observed in past few years shows
clear evidence that there is a huge investment going into these stock markets through various
sources and the number of companies listed in the National stock exchange has also increased
significantly. In 1992 government liberalized foreign investment into the Indian market and there
was a huge inflow of foreign currency into the Indian market.
1.11 Stock Market Indices

A stock market index is created by selecting a group of stocks that are representatives of the
whole market or a specified sector or segment of the market. An Index is calculated with the
reference to a base period and a base index value. An index is used to give information about the
price movement of the products in the financial, commodities or any other markets. Financial
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indexes are constructed to measure price movements of stocks, bond, T-bills and Other form of
investments. Stock market indexes are meant to capture the overall behavior of equity markets.
These indices are broad-market indices, consisting of the large, liquid stocks listed on the
Exchange. They serve as a benchmark for measuring the performance of the stocks or portfolios
such as mutual fund investments.
Some board market indices area.
b.
c.
d.
CNX Nifty
CNX 500
CNX Midcap
CNX Smallcap Index
CNX 500- The CNX 500 is Indias first broad based benchmark of the Indian Capital Market.
The CNX 500 Index represent about 96.42% of the free float market capitalization of the stocks
listed on NSE as on June 30, 2014. The total traded value for the last six month ending june
2014, of all Index constituents is approximately 96.28% of the traded value of all stocks on
NSE.
The CNX 500 companies are disaggregated into 72 industry indicies Like CNX Industry Indices.
Industry weightages in the index reflect the industry weightages in the market.
CNX Nifty- The CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based
derivatives and index funds. CNX Nifty is owned and managed by India Index Services and
Products Ltd. (IISL). IISL is Indias first specialized company focused upon the index as a core
product.
The CNX Nifty Index represents about 66.85% of the free float market capitalization of the
stocks listed on NSE as on june 30, 2014.
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The total traded value for the last six months ending june 2014 of all index constituents is
approximately 50.39% of the traded value of all stocks on the NSE.
CNX Midcap- The medium capitalized segment of the stock market is being increasingly
perceived as an attractive investment segment with high growth potential. The CNX midcap
primary objectives are to capture the movement and be a benchmark of the midcap segment of
the market. It represents about 72% of the total market capitalization of the mid-cap universe and
about 70% of the total traded value of the mid-cap universe (mid-cap universe is defined as stock
having average six months market capitalization between Rs.75 crores and Rs. 750 crores).
The CNX Midcap Index represents about 13.93% of the free float market capitalization of the
stocks listed on NSE as on june 30, 2014. The total traded value for the last six months ending
june 2014, of all index constituents is approximately 22.31% of the traded value of all stocks on
NSE.
CNX Smallcap- The CNX Smallcap Index is designed to reflect the behavior and performance of
the small capitalised segment of the financial market. The CNX Smallcap Index comprises of
100 tradable, exchange listed companies.
The index is calculated using free float market capitalization methodology with a base date of
January 1, 2004 indexed to a base value of 1000.
The CNX Smallcap Index represents about 3.45% of the free float market capitalization of the
stocks listed on NSE as on june 30,2014.
The total traded value for the last six months ending june 2014, of all index constituents is 9.17%
(approx.) of the traded value of all stocks on NSE.
Foreign Institutional Investors (FII) means an institution established or incorporated outside

India which proposes to make investment in securities in India. They are registered as FIIs in
accordance with Section 2 (f) of the SEBI (FII) Regulations 1995. FIIs are allowed to subscribe
to new securities or trade in already issued securities. In the Union Budget 2013-14, announced
on 28 February 2013, vide Para 95, Honorable FM announced his intention to go by the
internationally accepted definition for FIIs and FDIs, as follows In order to remove the
ambiguity that prevails on what is Foreign Direct Investment (FDI) and what is Foreign
Institutional Investment (FII), it is proposed to follow the international practice and lay down a
broad principle that, where an investor has a stake of 10 percent or less in a company,
it will be treated as FII and, where an investor has a stake of more than 10 percent, it will be
treated as FDI. A committee will be constituted to examine the application of the principle and to
work out the details expeditiously.
Foreign institutional investors (FIIs), whose investments are often called 'hot money' because
they can be pulled out at anytime, have been blamed for large and concerted withdrawals of
capital from the country at the time of recent financial crisis, they have emerged as important
players in the Indian capital market.
SEBIs Definition of FIIs presently includes foreign pension funds, mutual funds,
charitable/endowment/university funds, asset management companies and other money
managers operating on their behalf in a foreign stock market.
Foreign institutional investment is liquid nature investment, which is motivated by international
portfolio diversification benefits for individuals and institutional investors in industrial country.
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REGULATORY FRAMEWORK FOR FII

The following entities, established or incorporated abroad, are eligible to be registered as FIIs:
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
Pension Funds.
Mutual Funds.
Investment Trusts.
Asset Management Companies.
Nominee Companies.
Banks.
Institutional Portfolio Managers.
Trustees.
Power of Attorney holders.
University funds, endowments, foundations or charitable trusts or charitable societies.
Further, following entities proposing to invest on behalf of broad based funds, are also eligible to
be registered as FIIs:
a)
b)
c)
d)
Asset Management Companies

Institutional Portfolio Managers
Trustees
Power of Attorney Holders
From 1980 to 1998, international capital flows, a key indication of investment across borders,
grew by almost 25% annually, compared to the 5% growth rate of international trade. This
investment has been a powerful catalyst for economic growth. But as with many of the other
aspects of globalization, foreign investment is raising many new questions about economic,
cultural and political relationships around the world. Flows of investment and the rules that
govern or fail to govern it can have profound impacts upon such diverse issues as economic
development, environmental protection, labour standards and economic stability. India opened its
stock market to foreign investors in September 1992, and in 1993, received portfolio investment
from foreigners in the form of foreign institutional investment in equities. This has become one
of the main channels of FII in India for foreigners. Initially, there were many terms and
conditions which restricted many FIIs to invest in India. But in the course of time, in order to
attract more investors.
India opened its stock market to foreign investors in September 1992 and has since 1993,
received considerable amount of portfolio investment in the form of Foreign Institutional
Investors (FIIs) investment in equities. This has become one of the main channels of
international portfolio investment in India for foreigners
Until the 1980s, there was a general reluctance towards foreign investment or private commercial
flows as India development strategy was focused on self-reliance and import substitution and
current account deficits were financed largely through debt flows and official development
assistance. A major development in our country, post 1991 has been liberalization of the financial
sector, especially that of capital markets. After the launch of the reforms, foreign institutional
investors (FIIs) from September 14, 1992, with suitable restrictions, were permitted to invest in
all securities traded on the primary and secondary markets, including shares, debentures and
warrants issued by companies which were listed or were to be listed on the Stock Exchanges in
India and in schemes floated by domestic mutual funds. A positive contribution of the FIIs has
been their role in improving the stock market infrastructure and the SEBI assured its contribution
towards its development.
Hence, in this age of transnational capitalism, a significant amount of capital is flowing from
developed world to emerging economies. Positive fundamentals combined with fast growing
markets have made India an attractive destination for foreign institutional investors (FIIs).
Although the Foreign institutional investors (FIIs), whose investments are often called 'hot
money' because they can be pulled out at anytime, have been blamed for large and concerted
withdrawals of capital from the country at the time of recent financial crisis, they have emerged
as important players in the Indian capital market. With over 20 million shareholders, India has
the third largest investor base in the world after the USA and Japan. Over 9,000 companies are
listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers.
With rapid changes in the economy because of liberal economic policies and fast
pace changes due to globalisation, Indian market has become a focus point for foreign investors.
Organisations tend to target for large volume of trade in this era of globalisation. Trade flows are
indeed one of the most visible aspects of globalization. International investment is a powerful
source in propelling the world toward closure economic integration.FII refers to the investment
made by resident of one country in the financial capital and asset of another country It facilitates
and persuades large productivity and help in shaping up balance of payments. FII flows in India
have continuously grown in importance.
A country growth is determined by its investment towards the infrastructural development and
the industry performance. The stock market acts as a bridge in procuring the funds from the
investor and the same is utilized for the purpose of industrial growth and in turn results in
corporate growth. In terms of growth measurement of stock market, the index is used as proxy to
ascertain the level of the growth over the period of the years. Normally stock market indices
show ups and downs with respect tot heir movement due to the price fluctuation and the price of
the script is operated under market condition i.e. demand and supply factors. As long as the
influx of investment is at the larger extent, the indices of the stock market react positively
showing upward trend. The growth of the stock market depends on both retail investors and
foreign institutional investors. Since the contribution by the retail investors is far away from the
expectation, the role of FII has become a key factor in determining the success of Indian capital
market. FIIs have been allowed to invest in all securities traded on the primary and secondary
markets, including shares, debentures and warrants issued by companies which were listed or
were to be listed on the Stock Exchanges in India. The number of FIIs registered with SEBI was
3 in 1992-93 and since then it has increased to 1713 in 2009-2010. The FIIs have been playing a
significant role in the Indian capital market in capital formation and economic development of
the country. Foreign institutional investors are permitted to invest in the primary market and
secondary capital markets in India by a way of Portfolio Investment Scheme (PIS) under which
FIIs can acquire shares/debentures of Indian companies through the stock exchanges of India.
The overall investment ceiling for FIIs is 24 percent of the paid capital of the Indian company.
This limit is set as 20 percent of the paid up capital in case of public sector banks, including the
State Bank of India. However, this ceiling of 24 percent can be raised up to sectorial
cap/statutory ceiling, provided approval of the board is obtained and the general body of the
company passes a special resolution to the effect.
FII is a short term investment by foreign institutions, in the financial markets of other countries.
These institutions are generally mutual funds, investment companies, pension funds and
insurance houses. The SEBI is the nodal agency for dealing with FIIs and they have to obtain
initial registration with SEBI. FII widens and deepens the stock exchanges and provides a better
price discovery process for the scripts. It is a fair-weather friend and can desert the nation with
what is happening in India right now, thereby pulling down not only our share prices but also
wrecking havoc with the Indian rupee because when FIIs sell in a big way and leave India they
take back the dollars they had brought in.
The result of seamless FII flows was reflected by the boom in the stock markets during 2003 to
2008. Every year since FIIs were allowed to participate in the Indian market, FII net inflows into
India have been positive, except for the years 1998 and 2008. There has been a drastic increase in
the number of registered FIIs from 3 in 1993 to 1765 in 2011. This reflects the strong economic
fundamentals of the country, as well as the confidence of the foreign investors in the growth and
stability of the Indian market.
During the late 1980s and early 1990s portfolio investment emerged as an important form of
capital inflow to developing countries. The importance of portfolio investment to developing
countries has come down after the East Asian crisis of 1997. However, unlike most other
developing countries, India is still more dependent upon FPI than Foreign Direct Investment
(FDI) as a source of foreign investment. For the period 1992 to 2005, more than 50 percent of
foreign investment in India came in the form of FPI. Given such high dependence of the Indian
economy on FPI, it is important to assess whether and how FPI has contributed to the economic
development of the country. Secondly, the spate of financial crises since the late 1990s have
repeatedly highlighted that the current global financial architecture, with its emphasis on
speculative capital flows, can seriously disrupt the economic prospects of a developing countries.
This has become one of the main channels of FII in India for foreigners. Initially, there were
many terms and conditions which restricted many FIIs to invest in India. But in the course of
time, in order to attract more investors, The major source (almost 50%) of money the FIIs invest
is from the issue of Participatory Notes (P-Notes) or what are sometimes called Offshore
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Derivatives. They are instruments used by foreign investors that are not registered with the SEBI
(Securities & Exchange Board of India) to invest in Indian stock markets.
Procedure of Registration as FII

Application for registration as an FII should be made in Form A. The format of Form A is
provided in the SEBI (FII) Regulations, 1995. The application form and all supporting
documents must be submitted in duplicate, one set each for SEBI and Reserve Bank of India.
Both sets of application are to be sent to SEBI only. If the applicant is eligible and all documents
are submitted with the application, the eligibility is generally conveyed with 10 to 12 days of
receipt of application by SEBI. The registration procedure operates as a single window procedure
through SEBI in which the following steps are involved:
1. SEBI forwards one set to Reserve Bank of India.

2. The application is processed by SEBI to determine its eligibility for grant of registration as
foreign institutional investor. After the initial processing is complete, SEBI writes to Reserve
Bank of India mentioning the eligibility of the applicant. At the same time , a letter is sent to
applicant asking it to submit the registration fees of US$ 5,000 through a demand draft drawn in
favour of Securities and Exchange Board of India payable at New York.
3. Reserve Bank of India gives approval to the FII through its designated bank. This approval is
granted according to Foreign Exchange Management Act and enables the FII(s) to open a bank
account. This is a special non-resident rupee account of the FII meant purely for inward
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remittance and meeting payment obligation with regard to securities market. It must be note that
all balance lying in this account is fully repatriable.
4. Upon receipt of fees from the applicant and FEMA approval from Reserve Bank of India,
SEBI grants the certificate of registration, which is valid for five years and after the specified
period; it should be renewed upon the payment of fee of US $5000.
Division of Foreign Institutional Investors and Custodians that comes under Investment
Management Department of SEBI handles FII cases.
Foreign Institutional Investors Can Make Investment In The Followings:

1. Securities in primary and secondary markets including shares, debentures and warrants of
companies, unlisted, listed or to be listed on a recognized stock exchange in India, and
2. Units of schemes floated by domestic mutual funds including Unit Trust of India, whether
listed on a recognized stock exchange or not .
3. Units of scheme floated by a collective investment scheme
4. Derivatives traded on a recognized stock exchange
5. Commercial papers
6. Dated Government Securities
7. Security receipts &
8. Indian Depository Receipt.
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FII/sub-account may issue, deal in or hold offshore derivative instruments such as Participatory
Notes, Equity Linked Notes or any other similar instruments against underlying securities, listed
or proposed to be listed on any stock exchange in India. These are allowed to trade in all
exchange traded derivative contracts subject to the position limits as prescribed by SEBI from
time to time. Clearing Corporation monitors the open positions of the FII/ sub-accounts of the FII
for each underlying security and index, against the position limits, at the end of each trading day.
Investment of FIIs are motivated not only by the domestic and external economic conditions but
also by short run expectations shaped primarily by what is known as market sentiment. The
element of speculation and high mobility in FII investment can increase the volatility of stock
return in emerging markets.
Volatility is an unattractive feature that has adverse implications for decisions pertaining to the
effective allocation of resources and therefore investment. Volatility makes investors averse to
holding stock due to increased uncertainty. Investors in turn demand higher risk premium so as to
ensure against increased uncertainty. A greater risk premium implies higher cost of capital and
consequently lowers physical investment.
The major change in the capital flows particularly in Foreign Institutional Investors (FIIs)
investments has taken place following the changes in trade and industrial policy.
Determinants of FII Flow in India
a) Risk - Whenever risk in home market increases, the foreign investors would start to pull
out of their home country thereby creating a deficiency of funds in domestic market,
hence so as to attract investment domestic interest rate would increase thereby to ensure
that the above equality is restored.
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b)
Inflation - At the time of high inflation, the real return on fixed income securities like
bonds and fixed deposits declines. Thus a bond which gives say around 7.5% interest rate
actually gives a real return of just 1% if the inflation is 6.5%. If the inflation increases
c)
further, the real return would decline more.

Interest rates -For the business, cost of borrowing rises this has a negative result on their
profit margins. As a result they might even delay any investment activity which may be
funded by borrowing to some later period when the interest rates are lower so as to
reduce their investment costs. As it can be seen from the above table, over the past year
RBI has increased the repo rate reverse repo rate, CRR and SLR. This has led to an
increase in the Prime Lending Rate (PLR) and hence the general interest rate in the
economy.
d) Good news /bad news -If say there is some bad news in the nation, which affects that is
decreases the asset price, which in turn decreases the return and hence FII would
withdraw from the market. However on the other hand, if there is good news, asset prices
would increase; thereby increasing return and hence FII would be attracted. But the
sensitivity with which investors withdraw is greater than with which they invest i.e. they
would be more cautious while investing than at the time of withdrawing. This is primarily
due to their basic nature of being risk averse, thus they would react more vigorously to
bad news than to good news
e)
Equity Returns - The results show that, the equity return in India (RBSE) is the main
driving force for foreign institutional investment, which is significant at all levels. That is
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increase in the returns in US stock market adversely affects the portfolio investment
flowing to India.
f) Predictable risk in foreign market (SDSRF) adversely affects FII flow to India and is
highly significant in the model.
g) GDP of India - Both have more or less direct relationship. The reason is change in capital
account. When interest rates were high India was attracting lot of investments so the
credit balance was high for that period. It kept on increasing form 2003-04 to 2007-08
and interest rates also kept on increasing from 2003-04 to 2007-08.besides there are
various other factors like rules and regulation , taxation , govt. policies etc.
Need For FII in Developing Countries like Indiaa) Infrastructure Renewal: To keep the Indian economy growing the infrastructure sector
like power, transport, mining & metallurgy, textiles, housing, retail, social welfare,
medical etc. has to be upgraded. Borrowing abroad supplemented with Indian resources is
the only way open to India. This upgrade is needed prior or in step with the industrial and
service exports sector growth. It has to be placed on a higher priority.
b) Bridge the technological gap: Developing countries have a very low level of technology.
Their technology is not up to the standards and they lack in modern technology.
Developing countries possess a strong urge for industrialization to develop their
economies and to wriggle out of the low-level equilibrium trap in which they are caught.
This raises the necessity for importing technologies from advanced countries. Such
technology usually comes with foreign capital.
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c) Optimum utilization of resources: A number of developing countries possess huge

mineral resources which are for untapped and unexploited. Due to lack of Technology
these countries are not able to use their resources to the fullest. As a result they have to
depend on the foreign investment with the help of which technology of the country and
that will ultimately lead to the optimum utilization of the resources. India has very huge
reserves of mineral resources and to optimize their use or rather for extracting them
efficiently and effectively modern technology is required which his possible through
foreign investment.
d) Balancing the balance of payment position: In the initial phase of economic development,
the under developing countries need much larger imports. As a result the balance of
payment position generally turns adverse. This creates gap between earnings and foreign
exchange. The foreign capital presents short run solution to the problem. So in order to
balance the Balance Of Payment Foreign Investment is needed.
Benefits of FIIs Investment

a) Reduced Cost of Equity Capital
FII inflows augment the sources of funds in the Indian capital markets. In a common
sense way, an increase in the supply of funds reduces the required rate of return for equity and
enhances stock prices. Simultaneously, it fosters investment by Indian firms in the country.
b) Imparting Stability to Indians Balance of Payment
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For promoting growth in India, there is a need to augment domestic investment, over and beyond
domestic savings, through capital flow. The excess of domestic investment over domestic
savings result in a current account deficit and this deficit is financed by the capital flow in the
balance of payment.
c) Knowledge Flows
The activities of international institutional investors help strengthen financial system. FIIs
advocate modern ideas in market design, promote innovation, development of sophisticated
products such as financial derivatives, enhance competition in financial intermediation and lead
to spillover of human capital by exposing market participants to modern financial techniques and
international best practices and systems.
d) Strengthen Corporate Governance
FII participation in domestic capital markets often-lead vigorous advocacy of sound
corporate governance practices, improved efficiency and better shareholder value.
e) Improve Market Efficiency
A significant presence of FIIs can improve market efficiency through two channels. First,
when adverse macroeconomic news, such as bad monsoon, unsettles many domestic
investors, it may be easier for a globally diversified portfolio manager to be more
dispassionate about a countrys prospects, and engage in stabilizing trades. Second, at the
level of individual stocks and industries, FIIs may act as a channel through which
knowledge and ideas about valuation of a firm or an industry can more rapidly propagate
into market.
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Foreign institutional investors have almost no restriction for buying and selling of shares in
Indian Stock Market and because of favouring Indian economy condition and rapid growth
in stock market, it may be best place for FIIs to invest.
Negative Impact of FIIs Investmenta) POTENTIAL CAPITAL OUTFLOWS - Hot money refers to funds that are controlled
by investors who actively seek short-term returns. These investors scan the market for
short-term, high interest rate investment opportunities. Hot money can have economic
and financial repercussions on countries and banks. When money is injected into a
country, the exchange rate for the country gaining the money strengthens, while the
exchange rate for the country losing the money weakens. If money is withdrawn on short
notice, the banking institution will experience a shortage of funds.
b) INFLATION - Huge amounts of FII fund inflow into the country creates a lot of demand
for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand
created. This situation leads to excess liquidity thereby leading to inflation where too
much money chases too few goods.
c) PROBLEM TO SMALL INVESTORS - The FIIs profit from investing in emerging
financial stock markets. If the cap on FII is high then they can bring in huge amounts of
funds in the countrys stock markets and thus have great influence on the way the stock
markets behaves, going up or down. The FII buying pushes the stocks up and their selling
shows the stock market the downward path. This creates problems for the small retail
investor, whose fortunes get driven by the actions of the large FIIs.
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d) ADVERSE IMPACT ON EXPORTS - FII flows leading to appreciation of the currency

may lead to the exports industry becoming uncompetitive due to the appreciation of the
rupee.
Costs of FIIs Investmenta) Herding and Positive Feedback Trading

There are concerns that foreign investors are chronically ill informed about India, and the
lack of sound information may generate herding (a large numbers of FIIs buying and
selling together) and positive feedback trading (buying after positive returns, selling after
negative returns). These kinds of behavior can execrate volatility and push process away
from fair values. FIIs behavior in India, however, so far does not exhibit these patterns.
b) Balance of Payment Vulnerability

There are concerns that in an extreme event, there can be a massive flight of foreign
capital out of India, triggering difficulties in the balance of payments front.
Indias experience with FIIs so far, however, suggests that across episodes like the
Pokharn blasts or the 2001 stock market scandal, no capital flight has taken place. A
billion or more US dollars of portfolio capital has never left India within the period of
one month. When juxtaposed with Indias enormous current and capital account flows,
this suggests that there is little evidence of vulnerability so far.
c) Possibility of Taking Over Companies
While FIIs are normally seen as pure portfolio investors, without interest in control,
portfolio investors can occasionally behave like FDI investors and seek control of
companies that they have a substantial share holding in. Such outcomes, however, has not
19
been experienced by India. Furthermore, SEBIs takeover code is in place and has
functioned fairly well ensuring that all investors benefits equally in the event of takeover.
d) Complexities of Monetary Management
A policy maker trying to design the ideal financial system has three objectives.
The policy maker wants to continue national sovereignty in the pursuit of interest rate,
inflation and exchange rate objectives; financial markets that are regulated, supervised
and cushioned; and the benefits of global capital markets. Unfortunately, these three goals
are incompatible. They form the impossible trinity. Indias openness to portfolio flows
and FDI has effectively made the countrys capital account convertible for foreign
institutions and investors. The problems of monetary management in general and
maintaining a tight exchange rate regime, reasonable interest rates and moderate inflation
at the same time in particular have come to the fore in recent times. The problem showed
up in terms of very large foreign exchange reserve inflows requiring considerable
sterilization operations by the RBI to maintain stable macroeconomic conditions.
1.2 Objective of the study

1.21 To investigate the impact of Foreign Institutional Investment on Indian stock returns.
1.22 To investigate the impact of Foreign Institutional Investment on the volatility of Indian
stocks.
1.3 Scope of the study
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1.31 Monthly Closing prices from 1st January 2005 to 31st December 2014 of NSE indices like
NSE 500, Nifty Fifty, NSE Midcap and NSE Small cap are collected for the study. For this
purpose, secondary data from the website of NSE was collected.
1.32 Data of FII of last 10 year was collected from moneycontrol.com on a monthly basis.
1.33
SPILLOVER on the returns is calculated in this study
1.4 Methodology
1.41 Methodology Used for Data Collection

The monthly market prices of NSE was collected for the time period of 10 years from 1 st January
2005 to 31st December 2014. The data was collected from the official website of NSE
(WWW.NSE.COM).
The FII data was also collected on monthly basis for the time period of 10 years from 1 st January
2005 to 31st December 2014. The FII data was collected from the website of
www.moneycontrol.com.
1.42 Methodology used for Data Analysis

In order to analyze the transmission of volatility or volatility spillover effects between the stock
and foreign exchange markets, Generalized Autoregressive Conditionally Heteroscedastic model
(GARCH) is taken into consideration.
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GARCH model allows the conditional variance to be dependent upon previous own lags apart
from the past innovation. Through GARCH model, it is possible to interpret the current fitted
variance as a weighted function of long-term average value information about volatility during
the previous period as well as the fitted variance from the model during the previous period.
In GARCH models, restrictions are to be placed on the parameters to keep the conditional
volatility positive. This could create problems from the estimation point of view. One of the
primary restrictions of GARCH model is that they enforce a symmetric response of volatility to
positive and negative shocks. This arises due to the conditional variance being a function of the
magnitudes of the lagged residuals and not their signs. However; it has been argued that a
negative shock to financial time series is likely to cause volatility to rise by more than a positive
shock of the same magnitude.
The price and volatility spillover effect between the stock and foreign exchange markets and the
degree of integration as well as significant interrelationships can be interpreted in at least two
ways. First, a causal relationship may exist such that the volatility in one market induces
volatility in the other through a lead-lag relationship. This is possible because the trading hours
of the two markets are not common. Second, common international factors could influence the
volatility in both the markets, thereby giving rise to an apparent causal relationship between the
markets.
In order to find out the impact of Foreign Institution Investment on the Indian Stock Market
volatility, we have applied on National Stock Exchange (NSE) indices like CNX 500, NIFTY
FIFTY, CNX Smallcap, CNX Midcap using GARCH model.
GARCH (1, 1) Spillover Equation
22
Ht(stock indices)=
+ 2 t-1 + ht-1 +
1
(1)
where 0 > 0, 1 0, 1 0. In Equations (1), ht is the conditional variance of both stock indices
and exchange rates respectively, which is a function of mean 0. News about volatility from the
previous period is measured as the lag of the squared residual from the mean equation (t-12), last
periods forecast variance (ht-1) and the squared residual of exchange rate and stock indices,
respectively in both the above equations.
In the GARCH (1,1) spillover equation, we use the squared residual of another market ()
instead of residual on their level, which is used as a proxy for shock in other markets, because in
case of GARCH, we make sure that volatility is positive.
1.4 Hypotheses of the Study

H01 = There is no significant impact of FII on Indian Stock Market Volatility.
Ha1 = There is significant impact of FII on Indian Stock Market Volatility.
23
CHAPTER 2
LITERATURE REVIEW
Literature review is covered under chapter 2. include research findings of earlier studies (Indian
or foreign) with proper references related to the topic of study, which can support the findings or
hypothesis.
Bhattacharya and Jaydeep (2005) , determined the lead and lag interrelationship between the
Indian stock market , net foreign institutional investment and exchange rate. By employing the
Granger non-causality test and taking BSE sensitive index as proxy for the Indian stock market
and the indices of Real Effective Exchange Rate (REER) of the Indian Rupee for the exchange
rate for a period of 13 years started from Jan. 1993 to March 2005. The study suggested that
stock prices could capture information on neither the FIIs nor the exchange rate. Investors can
therefore apply profitable trading rules to earn supernormal profits. Also FII cannot capture
information on exchange rate thus adding to the possibility of application of profitable trading
rules. Under the circumstances, the Indian stock market seemed to be bearing the underlying
strain not currently visible at the surface. The implementation of profitable trading strategy may
at any point of time generate over-enthused investment and this, if coupled with market
overreaction, may result in a destabilized system. A point needed to be noted here is the current
concentration of FII funds in the IT and Banking sector, which in any event of flow reversals
might have worsen the situation.
24
Biswas, Jaydeep (2007), evaluated the impact of financial liberalization on the growth,
development and efficiency of Indian stock market vis--vis other selected Asian markets by
analyzing the data for the period from 1991 to 2007. He found that financial liberalization by
introducing FIIs has had a beneficial impact on the growth and development of the Indian stock
market. He brought out that the market has developed substantially since 1991-92, in terms of
trading volume, market capitalization, number of listed companies, increased efficiency and
liquidity. The author expressed that expansion of the Indian stock market in the postliberalization decade was truly impressive but in terms of the quality there has been a regress.
Karmakar, Madhusudan (2008), measured the volatility of daily market return in the Indian
stock market over the period by using the GARCH Model and observed that the market was
tranquil and volatile. The level of the volatility was modest for the first two decades. Almost
from the beginning there were indications of change in the mood of the market.Volatility touched
new high, and if surpassed all previous records and continued to increase till the end of the
decade.
Bansal And Pasricha (2009), assessed the Impact of market opening to FIIs, on Indian stock
market behavior. India announced its policy regarding the opening of stock market to FIIs for
investment in equity and related instruments on 14th September 1992. Using stock market data
related to Bombay Stock Exchange, for both before and after the FIIs policy announcement day,
they conducted an empirical examination to assess the impact of the market opening on the
returns and volatility of stock return. The study found that while there were no significant
25
changes in the Indian stock market average returns, volatility was significantly reduced after
India unlocked its stock market to foreign investors.
Dhwani Mehta (2009), discovered that the Indian stock markets have been experiencing
humungous amount of FII flows. This has affected small investors thinking that markets are
rigged. For the good news to Indian investors it has been established that out of all the factors, it
is basically the performance of Indian stock markets vis--vis other emerging and developed
markets that probably may cause returns and not the other way round.
Mohan, T.T.Ram (2009), indentified the impact of FII flow into Indian stock market have
conferred several benefits on the economy. The study helped augment capital flows at a time
when the balance of payment situation was not comfortable. The study allowed Indian firms to
access overseas capital at a cost that was lower than the domestic cost of capital. Moreover,
it ushered in major reforms in the working of securities markets and in corporate governance.
Authors also commented that volatility in FII flows does not pose systematic risk. The study
suggested deriving the benefits of FII flows without having to put up with the uncertainties
created by the participatory notes component.
Sumanjeet (2009) studied Foreign Capital Flows into India. The study stated that existing studies
revealed that the huge surge in international capital flows since early 1990s and has created
unprecedented opportunities for the developing countries like India to achieve accelerated
economic growth. International financial institutions routinely advise developing countries to
adopt policy regimes that encourage capital inflows. Since the introduction of the reform process
26
in the early 1990s, India has witnessed a significant increase in capital inflows. The size of net
capital inflows to India increased from US $ 7.1 billion in 1990-91 to US $ 108.0 billion in 200708. Today, India has one of the highest net capital inflows among the EMEs of Asia. Capital
inflows, however, not an unmitigated blessing. The main danger posed by large and volatile
capital inflows is that they may destabilize macroeconomic management. As evident, the
intensified pressures due to large and volatile capital flows in India in the recent period in an
atmosphere of global uncertainties has posed new challenges for monetary and exchange rate
management. He concluded that undertaking more economic reforms is not easy but has to be
done: the government can either manage the process or competitive forces will bring it upon us
in a lopsided manner. The ball is in the government's court. Countries that permit free capital
flows must choose between the stability provided by fixed exchange rates and the flexibility
afforded by an independent monetary policy.
Kaur, Manjinder and Dhillon, S. Sharanjit (2010), focused on the determinants of Foreign
Institutional investment in India. Market capitalization and stock market turnover of India have
significant positive influence only in short-run but Stock market risk has negative influence on
FIIs inflows to India. Among macroeconomic determinants, economic growth of India has
positive impact on FIIs investment in both long run and short run but all other macroeconomic
factors have significant influence only in long run like inflation. They concluded that host
country stock market returns (returns on Sensex) have positive and significant impact Where as
home country returns (returns on S&P 500 Index) have negative but insignificant influence on
FIIs investment inflows in long-run as well as in short-run.
27
As such, Indian stock market was not only sensitive to national events but also more sensitive to
international events. Due to the speculative motive of FIIs investment, investment by FIIs was
subjected to frequent reversals .The study showed that India is enjoying maximum blessings of
FIIs, and attracting substantial amount of FIIs investment as compared to other emerging
securities markets. Stock prices in India frequently deviate from fundamental values and these
deviations were largely due to the presence of FIIs in Indian stock market.
Shukla, K. Rajeev (2011), investigated the impact of foreign institutional investors on Indian
stock indices. The revealed that India, after United States hosts the largest number of listed
companies and Global investors now enthusiastically seek India as their preferred destination for
investment. The study concluded that FIIs have significant impact on the share prices of the
Midcap & Small-cap companies but small and a periodic shift in their behavior leads to market
volatility.
Saravanakrishnan (2011) analysed the Trend of FIIs investment in India on monthly basis during
January 2006- October 2011. The study observed the trends of FIIs investment along with the
scope and mechanism and causes of investment by them in India. The trend analysis techniques
were used to meet the objectives of the study. It was found that FIIs have invested Rs.91,067.60
crores in 2009 and withdrew Rs. 60,905.90 in 2008 due to the effect of global meltdown and
recession in world economy. The author found that political scenario, labour cost and
productivity, liberalized trade policy, infrastructure, incentives and operating conditions and
disinvestment policy were the causes of FIIs investment in India.
28
Dr. Rajput (2012) assessed the impact of FII of Stock Market: through Lead-Lag and Volatility
Spillover Effect the study stated the information spillover and volatility spill-over relationship
for Indian stock market. The study cover data during 1992-2011. The study examine if there has
been an increase in volatility persistence in the Indian stock market on after the process of
financial liberalization initiated in India. Further, it examined the shifts in stock price volatility
and the nature of events that apparently cause the shifts in volatility. We examine if there has
been an increase in volatility persistence in the Indian stock market on after the process of
financial liberalization initiated in India. This paper explores to develop alternative models from
co integration, VECM, Variance De-composition Analysis, Granger causality, Block
Exogeneity wald test, Impulse Response Analysis and alternative forms of the Autoregressive
Conditional Heteroscedasticity (ARCH) or its generalization, the Generalized ARCH
(GARCH) family, to estimate volatility in the Indian equity market return. Bidirectional
informational spillover was confirmed. The bidirectional volatility spill-over, persistence and
clustering was also confirmed in the sample series. Our findings have implications for policy
makers, hedgers and investors. The research contributes to present investment literature for
emerging markets such as India. The study examined that Foreign institutional investors have
gained a significant role in Indian stock markets. The dawn of 21st century has shown the real
dynamism of stock market and the various benchmarking of Nifty index in terms of its highest
peaks and sudden falls. The literature relating to information spillover and volatility spillover is
not adequately researched in India and was mainly confined to developed economies. Empirical
Studies on the subject reduced informational asymmetries in the market. The present study
evaluated informational spillover and volatility spillover effects in Indian stock market to bridge
the important gap in the literature. They study indicate that stock market and FIIs prices of all
29
sample commodities and indices are non stationary, and in fact integrated to order one and the
Long run equilibrium relationship is confirmed using Johansson co-integration procedure. These
co-integration results were supported by VAR adequacy test. Short term dynamics in the series
were examined using VECM. The results demonstrated that once price relationship of stock and
FIIs market deviated away from the long run co-integrated equilibrium, both markets made
adjustments to re-establish the equilibrium with FIIs . The results of VEC Granger causality test
showed bi-directional Granger lead relationships between the sample series. The Variance
Decomposition and Impulse responses results reconfirm the dominant role of Nifty in
information flow for these series. Next, the study examined the volatility spillover effects for
sample series to verify the Existence of risk transfer mechanism can work between stock market
and FIIs. E-Garch results confirm bivariate volatility spillover. Thus efficient hedging as well as
speculation strategies can be formed for theses commodities.
Arya & Purohit (2012) documented impact of An Analytical Research on FII in India and found
that it has gained a significant role in Indian stock markets. The beginning of 21 st century has
revealed the real dynamics of Indian stock market and its various benchmarking indices. The
study mainly focused to check the volatility of stock market & returns due to the existence of
FIIs in India. The GARCH model was used to check and measure the volatility caused by FIIs. It
was found that the correlation between the FIIs investment and market volatility and market
return has been comparatively low. But the correlation between the FIIs investment flows and
SENSEX, NIFTY, market capitalization and market turnover was strong and high. The study
investigated that the reason of volatility in Indian stock market was not the function of FIIs
investment flows, there were some other factors which were responsible it..
30
Kulshrestha Hemkant (2014), Examined Impact Of Foreign Institutional Investors (FIIs) on

INDIAN CAPITAL MARKET and observed that investments by FIIs and the movements of
BSE Sensex and CNX nifty are quite closely correlated. FIIS have positive impact on BSE
Sensex and Nifty. However there were other macroeconomic factors also influenced the stock
market, but FII is definitely one of the factors. The results which signify that market rise with
increase in FIIs and collapse when FIIs are withdrawn from the market. In the absence of any
other substantial form of capital inflows, the potential ill effects of decrease in the FII flows into
the Indian economy can be severe which was evident at the time of U.S subprime lending crisis.
The findings of this study also indicate that Foreign Institutional Investors have emerged as the
most dominant investor group in the domestic capital market particularly, in the companies that
constitute in BSE Sensex and CNX Nifty.
Since Indian capital market is vast and attract investors as their investment destination. The
Indian market was steadily growing and had allured domestic investors community and foreign
investors group in the past. The major part of investment in Indian capital market is attributed to
institutional investors among whom foreign institutional investors (FIIs) were of primary
importance. One eminent concern in the matter was whether these foreign institutional investors
(FIIs) regulate the Indian capital market. This paper examines whether market movement can be
explained by these investors and their impact on the capital markets. FIIs, because of their shortterm nature, can have bidirectional causation with the returns of other domestic financial markets
such as money markets, stock markets, and foreign exchange markets.
31
Hence, the understanding of determinants of FII is very important for any emerging economy as
FII exerts a larger impact on the domestic financial markets in the short run and a real impact in
the long run. The study indicated an attempt to find out determinants of foreign institutional
investment in India, a country that opened its economy to foreign capital due to their foreign
exchange crisis. The objective of the study was to find out whether there exist relationship
between FII and Indian capital market.
Sripriya and Shamugam. (2014) documented the impact of Foreign Institutional Investors on
Trading Activity and Volatility of Indian Stock Market. The study is an effort to predict the stock
return volatility and contribution of FII investment to that volatility was measured using Garch
(1, 1) model. It has been observed that volatility persists in Indian stock market due to net FII
activity leading to volatility clustering during the period of study. The results also highlighted
that Sensex and Nifty were affected by past and recent affects, whereas, other indices were
affected only by past volatility. Monthly data of the variables selected in the study were taken for
a period of ten years from April 2003 to March 2013.
A Aswini and kumar mayank (2014) examined the Impact of FII on Stock Market in India. The
study concluded that there was a high correlation between FII flow and the raise in the index of
Indian stock market in a longer span but there was a very less impact in the short span that is the
correlation between FII flow and the corresponding raise in the index of Indian stock market was
very poor and based on the chi-square test performed.
32
Being a developing Country, India attracts a large sum of FII every year. These foreign
investments have a great impact on the economy of India. Indian Stock Market, which was one
of the indicators of the economic status, was also being affected by the foreign investments
made. So the study has been done to validate the null hypothesis that this foreign institution
investment being made in India affected the stock market condition and Indian economy as well.
The stock market data have been taken from the websites of NSE and the FII data
have been taken from the GOI report. A descriptive study has been done to validate the null
hypothesis of association between FII and Stock Market. The association between these two has
been checked on yearly, monthly and weekly basis and the data for same have been collected for
last 10 years. This study has collected the yearly closing stock of NSE & BSE and FII values of
last 10 years (2003-2013). The study has used chi-square as a statistical tool to validate the null
hypothesis of association between stock market value and FII. It has also used correlation to find
the extent of association between these two variables. The inclusion criteria used for this study
were that only NSE and BSE stock market values have been taken and FII values have been
taken only from the government record books available in the public domain.
The major outcome from the Literature Review was that there was a correlation between FII
flow and the raise in the index of Indian Stock Market in a longer span but there was a very less
impact in the short span that is the correlation between FII flow and the corresponding raise in
the index of Indian Stock Market was very poor.
33
CHAPTER 3
DATA ANALYSIS AND PRESENTATION
Data analysis has been done using CNX 500 data, NIFTY FIFTY data, CNX Smallcap and
Midcap data from jan.1 , 2005 to Dec.31, 2014 on monthly return basis. This is done to illustrate
the impact of FII on Indian Stock Market volatility. The analysis was done by applying various
tests which includes unit root test, spillover test, and descriptive study.
Through Unit root test stationary test has been performed on returns. It includes testing at level
and first difference level which explains the t-statistics and probability value of data returns of
various indices. Results obtained indicate whether the data returns are stationary or not.
In spillover test, we have checked whether there is any effect of FII on different indices like
CNX 500, NIFTY FIFTY, CNX Smallcap and CNX Midcap. Using Garch model in spillover
test, we got coefficient value, Arch value and Garch value of various indices used. This helped us
to know on which index FII has maximum and minimum effect.
Descriptive study have collected all the 4 indices outcome and performed a comparative study in
all monthly data and analyzed which month has minimum risk value and maximum return value
through taking average of 10 years. The data has been analyzed through calculation of mean
value, median value, standard deviation, probability, Skewness, Kurtosis, Jarque- Bera and
maximum and minimum value of monthly returns.
34
3.1 Data Presentation

3.11 CNX 500 Prices at Level
7,000
6,000
5,000
4,000
3,000
2,000
1,000
10
20
30
40
50
60
70
80
90
100
110
120
Figure 1 - CNX 500 Prices at Level
The graph indicates that the CNX500 data when checked at level results to be non stationary as
when the data is tested through unit root test shows a probability value at level 0.8069 which is
greater than 5% significant level.
35
3.12 CNX 500 Prices at 1st Difference Level
30
20
10
-10
-20
-30
10
20
30
40
50
60
70
80
90
100
110
120
Figure 2 - CNX 500 Prices at 1st Difference Level
The graph indicates that the CNX500 data when checked at 1st difference level results to be
stationary as when the data is tested through unit root test shows a probability value at level
0.000 which is less than 5% significant level.
36
3.13 CNX NIFTY FIFTY Prices at Level
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
10
20
30
40
50
60
70
80
90
100
110
120
Figure 3 - CNX NIFTY FIFTY Prices at Level
The graph indicates that the CNX Nifty fifty data when checked at level results to be non
0.8148 which is greater than 5% significant level.
37
3.14 CNX NIFTY FIFTY Prices at 1st Difference Level
30
20
10
-10
-20
-30
25
50
75
100
125
Figure 4 - CNX NIFTY FIFTY Prices at 1st Difference Level
The graph indicates that the Nifty Fifty data when checked at 1st difference level results to be
38
3.15 CNX MIDCAP Prices at Level
14,000
12,000
10,000
8,000
6,000
4,000
2,000
10
20
30
40
50
60
70
80
90
100
110
Figure 5 - CNX MIDCAP Prices at Level
39
120
The graph indicates that the CNX Midcap data when checked at level results to be non stationary
as when the data is tested through unit root test shows a probability value at level 0.8640 which
is greater than 5% significant level.
3.16 CNX MIDCAP Prices at 1st Difference Level
40
30
20
10
0
-10
-20
-30
-40
25
50
75
100
125
Figure 6 - CNX MIDCAP Prices at 1st Difference Level
40
The graph indicates that the CNX Midcap data when checked at 1st difference level results to be
3.17 CNX SMALLCAP Prices at Level
6,000
5,000
4,000
3,000
2,000
1,000
10
20
30
40
50
60
70
80
90
100
110
Figure 7 - CNX SMALLCAP Prices at Level

41
120
The graph indicates that the CNX Smallcap data when checked at level results to be non
0.3833 which is greater than 5% significant level.
3.18 CNX SMALLCAP Prices at 1st Difference Level
40
30
20
10
0
-10
-20
-30
-40
-50
25
50
75
100
42
125
Figure 8 - CNX SMALLCAP Prices at 1st Difference Level
The graph indicates that the CNX Smallcap data when checked at 1st difference level results to
be stationary as when the data is tested through unit root test shows a probability value at level
B Data Analysis
3.21 Unit Root Test
The Unit Root Test have been used to check whether the Net investment by FIIs and return on
NSE
Indices including CNX 500, NIFTY FIFTY, CNX Smallcap and CNX Midcap
are
stationary during the study period from jan.2005-dec.2014. We have applied the Augmented
Dickey Fuller test and the null hypotheses were tested on monthly returns data at different level
of significance i.e. at level and at 1st difference significance level. Most statistical tools are based
on the assumption that the time series can be rendered approximately stationary.
Hypotheses of the Study
H01 = There is no significant impact of FII on Indian Stock Market Volatility.
Ha1 = There is a significant impact of FII on Indian Stock Market Volatility.
Through Unit root test stationary test has been performed on returns. It includes testing at level
and first difference level which explains the t-statistics and probability value of data returns of
various indices. Results obtained indicate whether the data returns are stationary or not.
43
Tables of Unit Root Test
Augmented Dickey-Fuller Test

CNX 500 data from 1 jan 2005 to 31st jan 2014
t-Statistic
Prob.
At level
-0.829034
0.8069
At 1st difference level
-9.923486
0.0000
Table 1
Unit Root Test of CNX 500
The result of Unit root test is given in table1, CNX 500 data from 1 jan 2005 to 31st jan 2014.
The probability value at level is 0.8069 which is greater than 5% significant level and the
probability value when checked at 1st difference level is found to be 0.0000. so it can be
concluded that the series is stationary at 1st difference level.
44
Nifty fifty data from 1 jan 2005 to 31st jan 2014

t-Statistic
Prob.
At level
-0.801397
0.8148
-10.38320
0.0000
Table 2
Unit Root Test of NSE Nifty Fifty
The result of Unit root test is given in table 2, Nifty fifty data from 1 jan 2005 to 31 st jan 2014.
NSE Midcap data from 1 jan 2005 to 31st jan 2014

t-Statistic
Prob.
At level
-0.606343
0.8640
-9.467391
0.0000
45
Table 3
Unit Root Test of NSE Midcap
The result of Unit root test is given in table3, NSE Midcap data data from 1 jan 2005 to 31st jan
2014. The probability value at level is0.8640 which is greater than 5% significant level and the
NSE Smallcap data from 1 jan 2005 to 31st jan 2014

t-Statistic
Prob.
At level
-1.791330
0.3833
-8.860611
0.0000
46
Table 4
Null Hypothesis of NSE Smallcap
The result of Unit root test is given in table4, NSE Smallcap data from 1 jan 2005 to 31st jan
2014.
The Augmented Dickey Fuller test and the null hypotheses were tested on monthly returns data
showed that probability value is found to be less than 5% which indicates that the data is
stationary and null hypothesis has been rejected.
3.22 Spillover Test
In order to analyze the transmission of volatility or volatility spillover effects between the stock
and foreign exchange markets, Generalized Autoregressive Conditionally Heteroscedastic model
(GARCH) is taken into consideration.
47
GARCH model allows the conditional variance to be dependent upon previous own lags apart
from the past innovation. Through GARCH model, it is possible to interpret the current fitted
variance as a weighted function of long-term average value information about volatility during
the previous period as well as the fitted variance from the model during the previous period.
In GARCH models, restrictions are to be placed on the parameters to keep the conditional
volatility positive. This could create problems from the estimation point of view. One of the
primary restrictions of GARCH model is that they enforce a symmetric response of volatility to
positive and negative shocks. This arises due to the conditional variance being a function of the
magnitudes of the lagged residuals and not their signs. However; it has been argued that a
negative shock to financial time series is likely to cause volatility to rise by more than a positive
shock of the same magnitude.
The price and volatility spillover effect between the stock and foreign exchange markets and the
degree of integration as well as significant interrelationships can be interpreted in at least two
ways. First, a causal relationship may exist such that the volatility in one market induces
volatility in the other through a lead-lag relationship. This is possible because the trading hours
of the two markets are not common. Second, common international factors could influence the
volatility in both the markets, thereby giving rise to an apparent causal relationship between the
markets.
In order to find out the impact of Foreign Institution Investment on the Indian Stock Market
volatility, we have applied on National Stock Exchange (NSE) indices like CNX 500, NIFTY
FIFTY, CNX Smallcap, CNX Midcap using GARCH model.
GARCH (1, 1) Spillover Equation
48
Ht(stock indices)= +1 2 t-1 + 1 ht-1 +
(1)
where 0 > 0, 1 0, 1 0. In Equations (1), ht is the conditional variance of both stock indices
and exchange rates respectively, which is a function of mean 0. News about volatility from the
previous period is measured as the lag of the squared residual from the mean equation (t-12), last
periods forecast variance (ht-1) and the squared residual of exchange rate and stock indices,
respectively in both the above equations. In the GARCH (1,1) spillover equation, we use the
squared residual of another market () instead of residual on their level, which is used as a proxy
for shock in other markets, because in case of GARCH, we make sure that volatility is positive.
Impact of FII on Indian Stock Market volatility of NSE Indices

Nifty
Midcap
Smallcap
Cnx500
1.174425
1.275792
1.656064
1.088384
(0.4739)
(0.0565)
(0.1162)
(0.2532)
0.149999
0.480346
0.337753
0.149549
GARCH
(0.4575)
0.599998
(0.0045)
0.314746
(0.0154)
-0.169951
(0.1754)
0.595852
FIISQ
(0.0597)
-1.72E-07
(0.0973)
-4.66E-08
(0.3577)
-7.51E-08
(0.0329)
-2.23E-07
(0.1349)
(0.4745)
(0.4027)
(0.0000)
C
ARCH
49
Table 5
Spillover effect of FII on NSE Indices
Table 5 illustrates the Garch results for National Stock Exchange stock returns in the case of
activity of Foreign Investigation Institution. The monthly market prices of NSE was collected
for the time period of 10 years from 1 st January 2005 to 31st December 2014. This index
demonstrates significant impact of the highest and the lowest returns on the stock returns. The
results show that FII has impact on the volatility of stock returns of CNX NSE 500 (-2.23E-07).
Where as , FII do not have impact on the volatility of stock returns of CNX NIFTY FIFTY(1.72E-07), CNX MIDCAP (-4.66E-08) and CNX SMALLCAP(-7.51E-08).
3.23 Descriptive study

The analysis of the averages (mean and median), dispersion using standard deviation and
skewness and kurtosis of Net Investments and Returns is shown in series above in table-1.
Descriptive study have collected all the 4 indices outcome and performed a comparative study in
all monthly data and analyzed which month has minimum risk value and maximum return value
through taking average of 10 years. The data has been analyzed through calculation of mean
value, median value, standard deviation, probability, Skewness, Kurtosis, Jarque-
50
Bera and maximum and minimum value of monthly returns.
3.23.1) Descriptive analysis of NSE 500
Mean
Median
Max.
Min
Std. dev.
Skewnes
Kurtosis
Jarque-
Probability
Sum
Bera
Sum
Sq.
Dev.
Jan
3.328
2.403
14.211
-7.384
5.841
0.085
3.358
0.059
0.970
29.953
272.951
Feb
-3.498
-3.656
13.363
-19.061
9.290
0.0826
2.571
0.087
0.957
-34.983
776.805
Mar
-1.127
0.405
5.251
-8.653
4.958
-0.307
1.588
0.986
0.610
-11.273
221.294
Apr
2.588
1.828
12.435
-8.085
6.501
-0.052
1.995
0.424
0.808
25.888
380.441
May
4.279
2.352
18.172
-6.289
7.723
0.509
2.129
0.748
0.687
42.796
536.899
Jun
0.638
-0.996
27.053
-19.618
13.030
0.516
2.975
0.444
0.800
6.383
1528.201
Jul
-0.339
1.346
8.194
-22.543
8.617
-1.822
5.615
8.388
0.015
-3.397
668.297
51
Aug
2.204
-0.379
13.610
-4.886
5.721
0.815
2.561
1.187
0.552
22.046
294.640
Sep
1.154
0.709
9.980
-8.698
5.126
-0.190
2.908
0.064
0.968
11.542
236.547
Oct
3.782
6.205
12.328
-12.163
7.407
-1.050
3.127
1.847
0.397
37.825
493.819
Nov
-1.143
2.676
11.575
-27.526
11.736
-1.146
3.498
2.294
0.317
-11.437
1239.656
Dec
1.708
3.605
12.325
-13.351
8.061
-0.446
2.385
0.489
0.782
17.088
584.932
52
Table 6
Descriptive Analysis of NSE 500
The descriptive statistics is used to analyse the behavior of the stock returns. Descriptive
stastistics employed on the returns showed that a mean value(average) of 4.279 crores which
indicates the returns of FII. Maximum and minimum return range from 27.053 crores to
negative flows of -27.526 crores . These negative flows also indicate selling by FIIs. Further,
standard deviation measures the dispersion as 13.030 which imply variability in the net
investment by FIIs during the period from Jan.2005 to Dec.2014 collected on monthly returns
3.23.2) Descriptive analysis of Nifty Fifty
Month
Jan
Feb
Mar
Mean
2.594
Median
Max.
Min
Std.
dev.
4.938
Skewness
Kurtosis
0.224
3.569
jarqueBera
0.905
Sum
Sum
Sq. Dev.
23.348
195.115
2.128
12.280
-6.271
-2.917
-3.11
12.148
-14.457
8.268
0.271
2.254
0.354
0.837
-29.171
615.353
-0.744
1.553
4.974
-8.207
4.697
-0.463
1.693
1.070
0.585
-7.444
198.569
53
0.197
Probability
Apr
3.182
2.520
13.472
-4.772
6.260
0.250
1.818
0.685
0.709
31.825
352.761
May
3.555
1.671
17.729
-7.578
7.863
0.517
2.222
0.698
0.705
35.552
556.513
Jun
-0.109
-0.891
21.487
-19.649
11.594
0.202
2.669
0.113
0.944
-1.099
1209.81
6
Jul
0.622
-19.581
8.086
-1.638
5.013
6.165
0.045
6.226
588.472
2.128
8.641
Aug
2.327
0.320
12.453
-2.941
4.889
0.961
2.813
1.556
0.459
23.278
215.188
0.630
0.494
8.744
-9.039
4.968
-0.282
2.833
0.144
0.930
6.306
222.193
4.428
6.264
12.468
-9.596
7.249
-0.713
2.341
1.029
0.597
44.283
472.973
-0.682
2.116
14.611
-26.078
11.988
-0.862
3.010
1.239
0.538
-6.820
1293.44
8
1.360649
12.29302
-12.6225
7.689038
-0.19901
2.381938
0.225177
0.8935
13.470
532.0918
Sep
Oct
Nov
Dec
1.347
54
Table 7
Descriptive Analysis of Nifty Fifty
investment by FIIs during the period from Jan.2005 to Dec.2014 collected on monthly returns
3.23.3) Descriptive analysis of NSE Midcap
Skewne
ss
Kurtosi
s
-9.560
7.288
0.214
2.763
0.100
0.951
32.299
478.058
16.491
-25.126
11.756
-0.176
2.639
0.106
0.948
-37.232
1243.999
-3.404
6.403
-9.206
5.712
0.301
1.633
0.928
0.628
-21.951
293.735
2.775
9.757
-11.658
6.555
-0.750
2.793
0.957
0.619
18.734
386.808
median
Max.
Jan
3.229
2.454
15.698
Feb
-3.723
-2.888
Mar
-2.195
Apr
1.873
Min
55
jarqu
eBera
Probabilit
y
Sum
Sum
Sq. Dev.
Std.
dev.
Mean
May
5.345
4.645
15.711
-4.988
7.433
-0.013
1.635
0.776
0.678
53.456
497.369
Jun
0.676
1.258
31.206
-19.687
13.645
0.840
3.798
1.444
0.485
6.766
1675.809
Jul
0.310
0.525
16.099
-25.300
11.056
-1.076
4.159
2.491
0.287
3.103
1100.193
Aug
3.377
2.230
12.142
-3.967
6.138
0.186
1.378
1.153
0.561
33.770
339.094
0.707
12.031
-10.280
6.887
0.016
2.268
0.223
0.894
2.968
426.893
3.575
5.572
12.454
-14.831
8.462
-1.064
3.206
1.906
0.385
35.759
644.554
Nov
-2.526
1.091
5.500
-29.586
10.562
-1.856
5.441
8.225
0.016
-25.262
1004.007
Dec
3.432
5.188
12.969
-11.763
8.282
-0.705
2.168
1.117
0.571
34.328
617.464
Sep
Oct
0.296
56
Table 8
Descriptive Analysis of NSE Midcap
stastistics employed on the returns showed that a mean value(average) of 5.345 crores
which indicates the returns of FII. Maximum and minimum return range from 31.206
crores to negative flows of -29.586 crores . These negative flows also indicate selling by FIIs.
Further, standard deviation measures the dispersion as 11800.94 which imply variability in the
net investment by FIIs during the period from Jan.2005 to Dec.2014 collected on monthly returns
3.23.4) Descriptive analysis of NSE Smallcap
Mean
Median
Max.
Min
Std.
dev.
Skewne
ss
Kurtosi
s
jarqu
eBera
Probabi
ly
Sum
Sum
Sq. Dev.
Jan
4.946
5.945
16.098
-10.626
8.149
-0.333
2.794
0.182
0.912
44.514
531.378
Feb
-4.261
-1.697
16.348
-26.199
12.120
-0.170
2.553
0.131
0.936
-42.612
1322.055
57
Mar
-1.781
-2.337
5.099
-10.846
5.465
-0.155
1.725
0.717
0.698
-17.810
268.867
Apr
3.053
3.902
12.544
-14.491
8.667
-0.669
2.697
0.784
0.675
30.533
676.105
May
6.111
4.276
16.305
-1.741
6.095
0.360
1.759
0.857
0.651
61.116
334.390
Jun
3.978
-1.709
38.686
-9.777
16.160
1.102
3.075
2.027
0.362
39.783
2350.59
Jul
-1.227
-0.295
9.004
-20.589
9.037
-0.869
3.043
1.260
0.532
-12.271
735.042
3.156
10.613
-13.159
7.723
-0.634
2.277
0.889
0.641
13.103
536.901
3.124
13.588
-10.429
6.905
-0.287
2.913
0.140
0.932
31.483
429.233
4.949
9.769
-20.775
8.918
-0.287
5.039
6.492
0.038
15.801
715.914
Aug
Sep
Oct
1.310
3.148
1.580
Nov
-2.476
3.646
12.053
-42.277
15.715
-1.752
5.231
7.193
0.027
-24.766
2222.845
Dec
0.268
3.483
11.853
-21.025
11.237
-0.747
2.270
1.152
0.561
2.681
1136.467
58
Table 9
Descriptive Analysis of NSE Smallcap
investment by FIIs during the period from Jan.2005 to Dec.2014 collected on monthly returns.
3.23.5) Descriptive analysis of FII Monthly Data
JAN
FEB
MEAN
MEDIA
N
MAX.
MIN.
STD.DE
V
Skewne
ss
Kurtosi
s
Jarqu
eber
a
0.13
8
Probabi
li-ty
sum
0.933
1776
9.65
Sum
sq.
dev
1.05E
+09
1777.
97
23.425
22673.
9
17326.
3
10777.
17
0.277
3.154
7135. 5742.4
5
38
25217.
4
-3754.5
9358.1
34
0.883
2.730
1.33
1
0.513
7135
3.8
7.88E
+08
MAR
8462.
37
7308
22351.
7
124.4
7482.9
29
0.652
2.391
0.86
4
0.649
8462
3.7
5.04E
+08
APR
4069.
5288.5
9764.5
-1865.6
4063.8
-0.2279
1.596
0.90
0.635
4069
1.49E
59
93
19
9.3
+08
MAY
3367.
81
1165.2
21267.
7
-8629.9
11800.
94
0.6028
1.7227
2
1.28
54
0.5258
3367
8.1
1.25E
+09
JUN
2598.
945
3198.5
13990.
85
10577.
7
7821.6
71
-0.4619
2.3594
01
0.52
66
0.7684
2598
9.45
5.51E
+08
JUL
7551.
897
8783.9
85
18132.
8
-7120.2
7870.5
65
-0.4463
2.3928
65
0.48
5
0.7844
7551
8.97
5.58E
+08
AUG
1455.
965
4220.6
5
11185.
3
10214.
6
7469.9
32
-0.3137
1.7110
0.85
6
0.6517
1455
9.65
5.02E
+08
SEP
1082
0.48
9432.3
29195.
8
-7937
11445.
37
-0.0293
2.0337
84
0.39
04
0.8226
1082
04.8
1.18E
+09
OCT
6682.
369
6441.3
2
24770.
8
14248.
6
11323.
65
-0.1996
2.5189
26
0.16
28
0.9218
6682
3.69
1.15E
+09
NOV
5584.
547
5946.2
7
18519.
9
-4597.4
7760.4
85
0.1179
1.9949
57
0.44
40
0.8008
5584
5.47
5.42E
+08
DEC
6285.
716
3186.4
24299.
2
-3410.9
8632.5
77
0.8979
2.8219
1.35
70
0.5073
6285
7.16
6.71E
+08
60
Table 10
Descriptive Analysis of FII
stastistics employed on the returns showed that a mean value(average) of 10820.48 crores
which indicates the returns of FII. Maximum and minimum return range from 29195.8
crores to negative flows of 17326.3 crores . These negative flows also indicate selling by FIIs.
Further, standard deviation measures the dispersion as 11800.94 which imply variability in the
net investment by FIIs during the period from Jan.2005 to Dec.2014 collected on monthly returns
basis.
The major results of applying unit root test where the null hypothesis of unit root test is rejected
and it can be interpreted that the series do not have any unit root and the series is said to be
stationary as the probability is less then 5 % level of significance. Major outcomes of spillover
test were that FII has impact on the volatility of stock returns of CNX 500 , whereas, there was
no impact on the volatility of stock returns of CNX Nifty fifty , CNX midcap and CNX
Smallcap.
61
Chapter 4
Summary & Conclusions
4.1 Findings of the Study

A daily NSE index has very low degree of positive correlation with daily FIIs investment.
This implies that there are many other macro economic factors have indirectly affected the daily
NSE index but their influence on the stock prices cannot be completely ignored. Hence both
indices move in direction of FIIs investment.
Economic growth i.e. Index of Industrial production (IIP) and Gross Domestic Product (GDP),
inflation and interest rate are the basic parameters used by FIIs to invest in any countries. FIIs
investments also guide to economic growth of country since they bring the much needed capital.
FIIs helped in the improvement of market efficiency. Since investment of FIIs increasing
therefore SEBI have to improve market trading efficiency in order to sustain FIIs investment.
This research is carried data of time period from Jan2005 to Dec 2014 of FIIs investment, and
Nifty. In order to analyze the transmission of volatility or volatility spillover effects between the
stock and foreign exchange markets, Generalized Autoregressive Conditionally Hetero scedastic
model (GARCH) is taken into consideration. In order to find out the impact of Foreign
62
Institution Investment on the Indian Stock Market volatility, we have applied on National
Stock Exchange (NSE) indices like CNX 500, NIFTY FIFTY, CNX Smallcap, CNX Midcap
using GARCH model.
The ARCH term was not found to be significant at 5% level , in the case of NIFTY and CNX500.
But the GARCH coefficient is significant which implies that the past volatility affects present
volatility. And so from value of correlation it is clearly seen that there is direct relation between
the CNX500 and FIIs. It means with an increase in investment from foreign institution (Purchase
of securities by FIIs) there will be an increase in value of CNX500 and vice-versa. Investment by
Foreign institutional investor is dynamic in nature and these characteristics of FIIs compel some
problem to the Indian stock market. Often it is seen that FIIs withdraw their investment at time of
fall down in CNX500. So some time CNX500 becomes free from influence of FIIs.
Briefings of research findings

i) FII have a significant impact on the movement of CNX500 only, that is on increasing
magnitude of FIIs in stock market there will also be increase in CNX500 and vice versa.
ii) From research it was found that FIIs is responsible for increasing the volatility in
stock market as found through CNX500.
iii)The month September (29195.8)Cr. has the highest FII and January (-17326.3) month
has the lowest FII.
iv)The mean value and standard deviation obtained in CNX500 were 4.279 and -27.526
respectively.
63
v) The mean value and standard deviation found in NIFTY FIFTY 4.428 and 11.988 were
respectively.
vi) The mean value and standard deviation obtained in Midcap were 5.3456 and 13.6455
respectively.
vii) The mean value and standard deviation obtained in Smallcap were 6.111 and 16.160
respectively
4.2 Limitations of Study

i) In this research paper only NSE indices are considered as parameter of stock market.
ii) Time duration taken into consideration is comparatively short, this is of 10 Years.
iii) Data is collected on monthly basis which may be less reliable in comparison to data
collected on daily basis.
As the time available is limited and the subject is very vast the study is
mainly focused on identifying whether there does exist a relationship between FIIs and Indian
Equity Stock Market. It is mainly based on the data available in various websites. The inferences
made are purely from the past years performance.
4.3) Scope of the study

i.
The scope of the study is limited to the India which has become an attraction for FIIs in
recent years, in fact the emerging markets of many developing countries have been
attracting large inflows of private capital in recent years.
64
ii.
The duration of the study should be more. Instead of short term study, the analysis
iii.
should be performed on a long term basis.

In this research the other model like Gravger, co-integration and can be apply for better
result
CHAPTER-5
RECOMMENDATIONS
5.1) RECOMMENDATIONS
i.
The suggestion has given to the government to work hard on this concept and make it
more attractive by providing various opportunities and cutting investment limits to pump
ii.
more foreign capital in India.

A suggestion to use a small portion of Indias foreign reserves met with howl of protests.
iii.
Government should allow more than 10% limit in LIC, Bank, Mutual Funds, Pension
iv.
Fund & other small companies to invest in India.

Investors can predict stock returns of NSE 500 through a proper study of FII.
Since financial markets in India have its vital importance, but government should try to shield
the real economy from FIIs vagaries.
65
References
1. A Aswini and kumar mayank (2014) , The Impact of FII on Stock Market in India ,
Global Journal of Finance and Management , Volume 6, Number 8 (2014), pp. 765770 , ISSN 0975-6477.
2. Arya & Purohit (2012), An Analytical Research on Foreign Institutional Investment in
India, IJCSMS International Journal of Computer Science & Management Studies, Vol.
12, Issue 03, September 2012.
3. Bansal, Anand and Pasricha J.S(2009), Foreign institutional investors impact on stock
prices in India. Journal of Academic research in Economics, Vol: 1, No. 2, October
2009.
4. Bhattacharya, and Jaydeep (2005), An Analysis of Stock Market Efficiency in the Light
of Capital Inflows and Exchange Rate Movements: The Indian Context, Asian Journal
of Finance & Accounting , Vol. 3, No.3; August 2005.
5. Biswas, Jaydeep (2007), Foreign Portfolios Investment and Stock Market Behavior in a
Liberalized Economy: An Indian Experience, Asian Economic Review, August, Vol. 47,
No.2, pp. 221-232.
66
6. Dr. Rajput (2012) , The impact of FII of Stock Market : through Lead-Lag and
Volatility Spillover , Asian Journal of Finance & Accounting, Vol. 4, No. 2 , ISSN
1946-052X.
7. Kaur, Manjinder. & Dhillon, S.Sharanjit (2010) Determinants of Foreign Institutional
Investors Investment in India Asian Journal of Business and Economics 2010, 3 (6), 5770.
8. Karmakar, Madhusudan (2008), A symmetric volatility and Risk return Relationship

in the Indian stock market, South Asia economic journal , Vol. 8, No. 1,(2008).
9. Kulshrestha Hemkant (2014), Impact Of Foreign Institutional Investors (FIIs) on Indian

Capital Market , IMPACT: International Journal of Research in Business Management
(IMPACT: IJRBM) , Vol. 2, Issue 3, Mar 2014, 35-52 , ISSN(E): 2321-886X; ISSN(P):
2347-4572.
10. Mehta Dhwani (2009), A Study: FII Flows in India, Research on Indian Stock Volatilty.
Vol 14. Publisher: Emerald Group Publishing Limited.
11. Mohan, T.T. (2009) A Study on Capital Stock Market Movement in India Present
Scenario, European Business Review. Vol 15. Publisher: MCB UP Ltd.
12. Shukla, K. Rajeev (2011) FII Equity Investment and Indian Capital Market: - An
Empirical Investigation. Pacific business review international, International Journal of
Economics and Finance Vol. 3, No.3; August 2011.
67
13. Singh, Sumanjeet. (2009) Foreign capital flows into India: Compositions, regulations,
issues and policy options Journal of Economics and International Finance Vol. 1(1), pp.
014-029.
14. Sripriya and Shamugam. (2004) , Foreign Institutional Investors Trading Activity
andVolatility in Indian Stock Market , Indian Journal Of Applied Research , Volume : 4
| Issue : 11 | November 2014 | ISSN - 2249-555X.
15. V, Saravanakrishnan, Trend Analysis of FIIs investment in India of monthly flows
during January 2006-October 2011, International Journal of Marketing Financial
Services & Management Research, Vol. 1, No.6, June, 2011, ISSN 2277-3622.
16. www.moneycontrol.com. downloaded on 13 February 2015

17. www.NSE.com downloaded on 16 February 2015
68

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CHAPTER -1

1.11 Stock Market Indices

Foreign Institutional Investors (FII) means an institution established or incorporated outside

REGULATORY FRAMEWORK FOR FII

Asset Management Companies

Procedure of Registration as FII

1. SEBI forwards one set to Reserve Bank of India.

Foreign Institutional Investors Can Make Investment In The Followings:

further, the real return would decline more.

c) Optimum utilization of resources: A number of developing countries possess huge

Benefits of FIIs Investment

b) Imparting Stability to Indians Balance of Payment

d) ADVERSE IMPACT ON EXPORTS - FII flows leading to appreciation of the currency

Costs of FIIs Investmenta) Herding and Positive Feedback Trading

b) Balance of Payment Vulnerability

1.2 Objective of the study

1.3 Scope of the study

SPILLOVER on the returns is calculated in this study

1.41 Methodology Used for Data Collection

1.42 Methodology used for Data Analysis

1.4 Hypotheses of the Study

Kulshrestha Hemkant (2014), Examined Impact Of Foreign Institutional Investors (FIIs) on

3.1 Data Presentation

Figure 1 - CNX 500 Prices at Level

3.12 CNX 500 Prices at 1st Difference Level

Figure 2 - CNX 500 Prices at 1st Difference Level

3.13 CNX NIFTY FIFTY Prices at Level

Figure 3 - CNX NIFTY FIFTY Prices at Level

3.14 CNX NIFTY FIFTY Prices at 1st Difference Level

Figure 4 - CNX NIFTY FIFTY Prices at 1st Difference Level

3.15 CNX MIDCAP Prices at Level

Figure 5 - CNX MIDCAP Prices at Level

3.16 CNX MIDCAP Prices at 1st Difference Level

Figure 6 - CNX MIDCAP Prices at 1st Difference Level

3.17 CNX SMALLCAP Prices at Level

Figure 7 - CNX SMALLCAP Prices at Level

3.18 CNX SMALLCAP Prices at 1st Difference Level

Figure 8 - CNX SMALLCAP Prices at 1st Difference Level

Tables of Unit Root Test

Augmented Dickey-Fuller Test

At 1st difference level

Nifty fifty data from 1 jan 2005 to 31st jan 2014

At 1st difference level

NSE Midcap data from 1 jan 2005 to 31st jan 2014

At 1st difference level

NSE Smallcap data from 1 jan 2005 to 31st jan 2014

At 1st difference level

Ht(stock indices)= +1 2 t-1 + 1 ht-1 +

Impact of FII on Indian Stock Market volatility of NSE Indices

3.23 Descriptive study

Bera and maximum and minimum value of monthly returns.

3.23.1) Descriptive analysis of NSE 500

3.23.3) Descriptive analysis of NSE Midcap

3.23.4) Descriptive analysis of NSE Smallcap

3.23.5) Descriptive analysis of FII Monthly Data

4.1 Findings of the Study

Briefings of research findings

4.2 Limitations of Study

4.3) Scope of the study

should be performed on a long term basis.

more foreign capital in India.

Fund & other small companies to invest in India.

8. Karmakar, Madhusudan (2008), A symmetric volatility and Risk return Relationship