IMPACT OF FOREIGN CAPITAL INFLOWS ON INDIAN STOCK MARKET

India has emerged as one of the most favoured destinations for global investments. This is reflected in the number of foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) registered with SEBI and number of foreign direct investors (FDI) in India. The dawn of 21st century has shown the real dynamism of stock market and the various benchmarking of sensitivity index (Sensex) and Nifty in terms of its highest peaks and sudden falls. There has been growing presence of FDI, FIIs, and FPIs in Indian stock market evidenced by increase in their net cumulative investments and they have significant impact on the Indian Stock Market. Foreign investors seem to have embraced Indian stocks yet again with net inflows crossing Rs. 1.2 lakh crore ($23 billion) in 2012 and taking their total cumulative investment in the country's equity market to an all-time high of $125 billion. The net inflow of Rs. 1.23 lakh crore during 2012 is the second-highest for a year and comes after a net outflow in the previous year 2011—preparing the ground for even better times ahead in 2013 on the back of continuing reform-push by the government and market regulator SEBI. At gross level, Foreign Institutional Investors (FIIs) purchased stocks worth about Rs. 6.5 lakh crore in 2012 and sold equities to the tune of Rs. 5.3 lakh crore translating into a net inflow of Rs. 1,21,652 crore ($23 billion). This was the second highest net inflow by FIIs in a single calendar year since their entry into Indian capital markets in 1992. In 2010, overseas investors had made a record Rs. 1.33 lakh crore ($29 billion) net investment into the share market. However, FIIs had pulled out a net Rs. 2,714 crore ($358 million) from the share market in 2011.Despite their unpredictable 'hot money' investment, these overseas entities have been amongst the most important drivers of Indian stock markets. The present research paper is an attempt to find out the impacts of FDI (Foreign Direct investment), FIIs (Foreign Institutional Investment), and FPIs (Foreign Portfolio investment) inflows on the movement of BSE (Bombay Stock Exchange) and NSE (National stock exchange) during period under study. The study is purely based on secondary data which were analyzed through Regression (OLS Model), Karl Pearson’s correlation, Analysis of Variance, etc., and found that FDI affects the most both Sensex and Nifty up to 61 per cent and 86 per cent respectively and is associated highly and positively with both the markets with a score of 0.78 and 0.92 respectively according to the Karl Pearson’s coefficient of correlation. However, the FPIs showed a very low impact on Sensex and a