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Stream/Area:
-
Subject:
-
Paper ID:
IJSREM62243
Volume:
10 |
4 |
April 2026
Pages:
1-9
Publication Frequency:
Monthly (12 issues per year)
License:International Journal of Scientific Research in Engineering and Management follows the Creative Commons Attribution 4.0 (CC BY 4.0) License, allowing free use and distribution with proper attribution.
MBA
MIT ADT University, Pune
Abstract: In this context, the purpose of the current paper is to examine the connection between FDI and the Indian capital market. With progressive liberalization of the FDI regime, India has become one of the best places for foreign investments. This development has been coupled with a number of developments in the Indian capital market, pointing at some level of dependency of these two variables.Thus, this study aims at examining the interaction between FDI and indices such as NIFTY 50 and BSE Sensex, studying the connection between FDI and these variables. The research methodology can be characterized as descriptive. In this case, the use of secondary data is proposed; more specifically, data from websites of Bombay Stock Exchange, National Stock Exchange of India, and Department for Promotion of Industry and Internal Trade will be used. The analysis period covers ten years, i.e., from January 2010 to December 2019, and quarterly data will be analyzed using E-Views Version 9.In order to make the study robust, the Augmented Dickey Fuller (ADF) test for the presence of a unit root is used to test stationarity, while multiple regression analysis is used to test the effect of FDI on the stock market indices. The results show that there is a significant effect of FDI on the NIFTY 50 and BSE Sensex index .
KEYWORDS
The current study attempts to explore the connection between FDI inflows and the performance of the Indian stock market measured by the BSE Sensex and the NIFTY 50 indices, based on secondary data for quarters ranging from 2010 to 2019. Trend analysis, ADF test for unit roots, correlation analysis, and multiple regressions were applied to analyze the type and level of association between the variables under study. It is evident from the results of the study that there has been a steady upward trend in FDI inflows in India over the time period considered, suggesting positive investor sentiment and economic stability. It has been found through econometrics that FDI inflows positively and significantly affect the stock market indices. Therefore, from the findings of the research, it can be deduced that FDI has played an instrumental role in the development of the Indian capital market, with improved liquidity levels and market sentiment playing a pivotal role. In addition, the positive association between the foreign direct investment and stock market indices further illustrates the significance of FDI in ensuring financial stability and increasing the efficiency of the capital markets. Nevertheless, there are other external factors that may influence the relationship, hence implying that FDI is one of the factors driving stock market trends, although not the only factor. All in all, it has been established that the role of Foreign Direct Investment in the development of the Indian stock market cannot be overlooked, especially in the chosen period.
1. FDI has a statistically significant impact on stock market performance. Regression results clearly show that foreign direct investments (FDIs) positively affect both BSE Sensex and NIFTY 50. Thus, we can say that any increase in foreign investment is followed by an improvement in stock performance. We can conclude that FDI plays an important role in affecting the liquidity position, confidence level, and general direction of the Indian stock market.
Publication Date
5/1/2026
Peer Review Type
Double-Blind Peer Review
Review Rounds: 2
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Conflict of Interest
The authors declare no conflict of interest related to this research work.
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