The Indian stock market has been moving northward with strong FII inflows. It has attracted more than $9 bn in the year 2005. The FII inflows have helped the BSE Sensex to scale the 10,000 mark, making it the fourth stock market in the world to reach this position. This article considers the FII factor and its impact on the Indian Capital Market. The BSE sensex has finally touched the highly anticipated 10,000 mark. To add to the cheers, it sustained the mark with a lead of 101.86 points to close at 10,081.86 on February 7, 2006. ICICI Bank, Taj Group of Hotels, Reliance, HDFC, Bajaj and Siemens were the ones that moved the market upward on that day. According to some senior officials of BSE, there was no need to get carried away by the 10,000 mark for it was only a logical step after the 9,000 mark.

The BSE sensex has finally touched the highly anticipated 10,000 mark. To add to the cheers, it sustained the mark with a lead of 101.86 points to close at 10,081.86 on February 7, 2006. ICICI Bank, Taj Group of Hotels, Reliance, HDFC, Bajaj and Siemens were the ones that moved the market upward on that day. According to some senior officials of BSE, there was no need to get carried away by the 10,000 mark for it was only a logical step after the 9,000 mark.

In an attempt to reduce the weakness in the financial system to speculative capital flows, it was recommended by Sebi that the financial system be further liberalized and opened for all players. The indication is clear. India has seen an incredible flow of investments by Foreign Institutional Investors (FIIs) since April 2003. During the period between 1993-98, the net FII investment averaged $1,776 mn a year; later during the Southeast Asian Crisis it dipped to an average of $295 mn in the period 1997-99. The net investment rose during the period 1999-2000 and 2001-2002 to $1,829 mn, but fell again to $377 mn in 2002-2003. The FIIs inflows averaged $9,599 mn a year during 2003-2005; it was estimated that up to $9,429 mn would be invested in the first nine months of 2005-2006. As per the statistics of the Securities and Exchange Board of India (Sebi), the cumulative net FII flows into India since liberalization (1990-2003) amounted to $15,804 mn. The increase in the cumulative value between March 2003 and December 2005 was $25,267 mn.

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