A STUDY ON IMPACT OF STOCK INDICES ON FOREIGN DIRECT INVESTMENT

This study investigates the relationship between Foreign Direct Investment (FDI) inflows and the performance of key Indian stock indices, specifically the Nifty 50 and BSE Sensex, from April 2020 to December 2023. Despite FDI’s crucial role in economic growth, existing research has often overlooked the nuanced interplay between stock market fluctuations and FDI within the Indian context. This study aims to fill this gap by analyzing the correlation and causal effects between these indices and FDI inflows, alongside a sectoral FDI trend analysis from 2020 to 2023. Utilizing secondary data, descriptive statistics, correlation, and regression analysis, the study found moderate positive correlations between the stock indices and FDI inflows; however, these relationships were not statistically significant, potentially due to the limited sample size. The regression models demonstrated weak predictive power and substantial unexplained variability, indicating that factors beyond stock market performance likely influence FDI inflows. Despite these limitations, the study highlights the need for more comprehensive data and analysis to better understand the dynamics between stock indices and FDI, providing valuable insights for policymakers to enhance India’s investment climate and global competitiveness.