Impact of FII Movements on Indian Stock Market

Recently, the Indian stock market has experienced a decline, largely due to Foreign Institutional Investors (FIIs) redirecting investments toward the Chinese market. This shift has resulted in a staggering loss of around 10 trillion rupees in the Indian markets. The increasing expectations surrounding investments in the Chinese stock market, driven by attractive economic packages and new funding by the Chinese government, are pulling FIIs away from India. The Chinese government has introduced a significant 200 billion dollar infusion to bolster its stock market, attracting investors’ attention towards it. Furthermore, the bankruptcy of the Chinese company Evergrande has exacerbated the situation, affecting investor trust. The growth in the Chinese stock market has become a primary driver for FIIs, leading to diminished participation in Indian equities. This has not only impacted domestic investors but has also reverberated through foreign exchange reserves, threatening long-term stability if not addressed. For India to maintain competitiveness and restore investor confidence in its stock market, there is a pressing need for improved policies and reform measures. Additionally, balancing the interests of both small and large investors remains essential to the overall health of the market.