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AN ASSIGNMENT ON

IMPACT OF FII FLOW ON THE BSE SENSEX


AND NIFTY
SUBMITTED BY:
SOUMITA PATRA-67
DIPTAKSHYA BANERJEE-76
AVIJIT BHATTACHARYYA-91
PRITAM PRIYADARSHINI DASH- 122

SUBMITTED TO: PROF. MANOJ KUMAR SAHOO

SENSEX & FII


FII: Foreign Institutional Investor (FII) is used to denote an investor - mostly of
the form of an institution or entity, which invests money in the financial markets of
a country different from the one where in the institution or entity was originally
incorporated.FII investment is frequently referred to as hot money for the reason
that it can leave the country at the same speed at which it comes in. In countries
like India, statutory agencies like SEBI have prescribed norms to register FIIs and
also to regulate such investments flowing in through FIIs. FEMA norms includes
maintenance of highly rated bonds (collateral) with security exchange.

SENSEX: Index of top 30 highly liquid companies listed in BSE. All companies
selected in Sensex depends on various technical factor like size, volume,
companys past performances and various other factors.But that 30 companies
should represent almost all sectors of India.Sensex(Index of BSE) is calculated
usingthe weighted average method using Listed Companies market
capitalization.The Sensex moves up and down based on movement of 30
companies share prices listed in BSE sensitivity index.The reasons of the rise and
fall of the Sensex may be due to macro-level or micro-level factors such as
Government policies, Inflation rate, FDI & FII etc.In our research ,we have only
considered the FII factor to find out that is there any impact of the FII on the
movement of Sensex.So, we have taken the help of the Regression and Correlation
tools to measure it.

HYPOTHESES TESTING:
Null (Ho):There is no association between Sensex/Nifty and FII
[ Ho: = 0]

Alternate (Ha):There is an association between Sensex /Nifty and FII


[Ha : 0]

Year 1997-2008 (Overall regression analysis and


correlation between SENSEX and FII):
Data of SENSEX and FII from 1997-2008

sensex

FII

log sensex

feb,08
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
jan'07
feb
apr
may
jun
jul
aug
sep
oct
nov
dec
jan'06
feb
apr

17578.7
15644.4
17287.3
16415.6
13461.6
14355.8
14564.5
12860.4
9788.06
9092.72
9647.31
14090.9
12938.1
13872.4
14544.5
14650.5
15551
15318.6
17291.1
19838
19363.2
20287
9919.89
10370.2
11851.9

-8991
-1643
20238
-1432
-734
-3011
-499
464
-1403
-5250
-574
2385
-2433
1963
1847
3279
4685
-3323
7057
6833
-265
2396
1692
685
3276

9.774443221
9.657868304
9.757727407
9.705987381
9.507596467
9.571909321
9.58634234
9.461908102
9.188918554
9.115229372
9.174434399
9.553284478
9.467931726
9.537656534
9.584968194
9.592229744
9.651880224
9.636823055
9.757947197
9.895354569
9.871129636
9.917735566
9.202297112
9.246691587
9.380243471

may
jun

10398.6
10609.3

-3906
-1157

9.249426461
9.269486254

jul

10743.9

-595

9.282093431

aug
sep
oct
nov
dec
apr'05
may
jun
jul
aug
sep
oct
nov
dec
jan'04
feb
apr
may
jun
jul
aug
sep
oct
apr'03
may
jun
jul
aug
sep
oct
nov
dec
Jan' 02
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov

11699.1
12454.4
12961.9
13696.3
13786.9
6154.44
6715.11
7193.85
7635.42
7805.43
8634.48
7892.32
8788.81
9397.93
5695.67
5667.51
5655.09
4759.62
4795.46
5170.32
5192.08
5583.61
5672.27
2959.79
3180.75
3607.13
3792.61
4244.73
4453.24
4906.87
5044.82
5838.96
3311.03
3562.31
3469.35
3338.16
3125.73
3244.7
2987.65
3181.23
2991.36
2949.32
3228.82

1212
1064
1703
2159
-507
-299
-470
1313
1746
1204
1035
-469
-17
2122
2390
1421
-350
-503
1288
1645
1139
1008
4227
846
-457
-477
-432
448
411
807
2808
746
131
279
276
-73
87
-272
43
-33
-131
-9
-184

9.367267195
9.429829253
9.469769564
9.524881002
9.531474145
8.724929052
8.81211549
8.880981773
8.940553226
8.962574924
9.063518769
8.973645414
9.0812346
9.148244731
8.647461516
8.642505147
8.640311304
8.467923112
8.475424916
8.550689861
8.554889667
8.6275908
8.643344669
7.992873599
8.064872297
8.190667721
8.240809715
8.353433492
8.4013872
8.498391543
8.526117253
8.672307978
8.105014598
8.17816449
8.151722536
8.113175036
8.047423135
8.084778175
8.002242404
8.065023193
8.003483412
7.989329914
8.079872024

Dec
Jan' 01
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan'
2000
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan' 98
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Apr'97
May
Jun
Jul
Aug

3377.28
4326.72
4247.02
3604.38
3519.16
3631.91
3456.78
3329.28
3244.95
2811.6
2989.35
3287.56
3262

53
444
668
354
229
265
138
125
116
-179
35
70
28

8.124825931
8.372565028
8.35397284
8.189905052
8.165977604
8.19751396
8.148092799
8.110511343
8.084855221
7.941508995
8.002811251
8.097900927
8.090095783

5205.29
5446.98
5001.28
4657.55
4433.61
4748.77
4279.86
4477.31
4090.38
3711.02
3997.99
3972.12
3224.36
3622.22
3892.75
4006.81
3686.39
3250.69
3211.31
2933.85
3102.29
2812.49
2810.66
3055.41
3841.11
3755.1
4256.09
4305.76
3876.08

129
477
342
349
155
-160
-194
75
235
-271
78
114
62
44
256
457
343
42
233
33
-154
-100
-23
356
-31
-115
-269
-26
-48

8.557430695
8.602816606
8.517449159
8.446244838
8.39696943
8.465640916
8.361675578
8.406777699
8.316393154
8.21906205
8.293547014
8.287055236
8.07848976
8.194842377
8.266871128
8.295750692
8.212402938
8.08662256
8.074434233
7.984070833
8.039895827
7.941825491
7.94117461
8.024669069
8.253516666
8.230870195
8.356106177
8.36770894
8.262579613

Sep
Oct
Nov

3902.03
3803.24
3560.29

-43
-140
-50

8.26925221
8.243608614
8.177597281

Regression Model 1: Sensex = a+bFII (for the year 1997 to 2008)


25000
20000
15000
10000
sensex

5000

FII

-5000

feb,08
sep
may
dec
aug
jun
jan'04
sep
sep
Apr
Nov
Jun
Jan' 2000
Aug
Mar
Oct
Aug

-10000
-15000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.21084303
R Square
0.044454783
Adjusted R Square
0.036072808
Standard Error
4665.921751
Observations
116
ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

1
114
115

SS
115464108.6
2481874140
2597338248

MS
F
115464108.6 5.303616
21770825.79

Coefficients
6875.450658
0.386253228

Standard Error
440.4479733
0.167720469

t Stat
P-value
15.61013122 4.45E-30
2.302958184 0.023095

Significance
F
0.023095022

Lower 95%
6002.926644
0.05400028

MEAN OF SENSEX

SD OF SENSEX

CV OF SENSEX

7058.458103

4731.896762

67.03867464

MEAN OF FII

SD OF FII

CV OF FII

473.8017241

2582.987992

545.1622189

Regression Analysis: The significance level is 0.023095022 which is less


than the alpha value of 0.05.So we can conclude that at a confidence level of 95
percent the null hypothesis is to be rejected, and that FII has a significant impact
on the SENSEX.
Correlation: The R-square value is 0.044454783.So there is a negligible
correlation between SENSEX and FII.

Year 2003-2008 (Overall regression analysis and


correlation between SENSEX and FII):
Data of SENSEX and FII from 2003-2008
YEAR
feb,08
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
jan'07
feb
apr
may

sensex

FII
17578.7
15644.4
17287.3
16415.6
13461.6
14355.8
14564.5
12860.4
9788.06
9092.72
9647.31
14090.9
12938.1
13872.4
14544.5

log sensex
-8991
-1643
20238
-1432
-734
-3011
-499
464
-1403
-5250
-574
2385
-2433
1963
1847

9.774443221
9.657868304
9.757727407
9.705987381
9.507596467
9.571909321
9.58634234
9.461908102
9.188918554
9.115229372
9.174434399
9.553284478
9.467931726
9.537656534
9.584968194

jun
jul
aug
sep
oct
nov
dec
jan'06
feb
apr
may
jun
jul
aug
sep
oct
nov
dec
apr'05
may
jun
jul
aug
sep
oct
nov
dec
jan'04
feb
apr
may
jun
jul
aug
sep
oct
apr'03
may
jun
jul
aug
sep
oct

14650.5
15551
15318.6
17291.1
19838
19363.2
20287
9919.89
10370.2
11851.9
10398.6
10609.3
10743.9
11699.1
12454.4
12961.9
13696.3
13786.9
6154.44
6715.11
7193.85
7635.42
7805.43
8634.48
7892.32
8788.81
9397.93
5695.67
5667.51
5655.09
4759.62
4795.46
5170.32
5192.08
5583.61
5672.27
2959.79
3180.75
3607.13
3792.61
4244.73
4453.24
4906.87

3279
4685
-3323
7057
6833
-265
2396
1692
685
3276
-3906
-1157
-595
1212
1064
1703
2159
-507
-299
-470
1313
1746
1204
1035
-469
-17
2122
2390
1421
-350
-503
1288
1645
1139
1008
4227
846
-457
-477
-432
448
411
807

9.592229744
9.651880224
9.636823055
9.757947197
9.895354569
9.871129636
9.917735566
9.202297112
9.246691587
9.380243471
9.249426461
9.269486254
9.282093431
9.367267195
9.429829253
9.469769564
9.524881002
9.531474145
8.724929052
8.81211549
8.880981773
8.940553226
8.962574924
9.063518769
8.973645414
9.0812346
9.148244731
8.647461516
8.642505147
8.640311304
8.467923112
8.475424916
8.550689861
8.554889667
8.6275908
8.643344669
7.992873599
8.064872297
8.190667721
8.240809715
8.353433492
8.4013872
8.498391543

nov
dec

MEAN

5044.82
5838.96

2808
746

10396.14237

853.3050847

8.526117253
8.672307978

Regression Model 2: Sensex = a+bFII (for the year 2003 to 2008)

25000
20000
15000
10000

sensex

5000

FII
YEAR

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61
-5000
-10000
-15000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.152496
R Square
0.023255
Adjusted R
Square
0.006414
Standard Error
4735.534
Observations
60
ANOVA
df
Regression
Residual
Total

SS
MS
F
1 30966998.94 30966998.94 1.380896666
58 1300666431 22425283.29
59 1331633430

Coefficients

Standard

t Stat

P-value

Significance F
0.244750177

Lower 95%

Error
Intercept
X Variable 1

10052.94 628.225655 16.00211157 6.12076E-23


0.202526 0.172345719 1.175115597 0.244750177

CV OF SENSEX
CV OF FII

8795.406755
-0.142461294

46.12110148
422.8181573

Regression Analysis: The significance level is 0.244750177 which is


greater than the alpha value of 0.05.So we can conclude that at a confidence level
of 95 percent the null hypothesis should be accepted, and that FII has no
significant impact on the SENSEX.
Correlation: The R-square value is 0.023255.So there is a negligible correlation
between SENSEX and FII.

Year 2008
Year wise Details impact on FII on SENSEX 2008
Regression Model 3: Sensex = a+bFII (for the year 2008)

25000
20000
15000
10000
sensex

5000

FII

0
-5000
-10000
-15000

feb,08 mar apr may jun

jul

aug sep

oct

nov dec

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.267875613
R Square
0.071757344
Adjusted R
Square
-0.03138073
Standard Error
3113.046757
Observations
11

ANOVA
df
1
9
10

SS
6742463.899
87219541.02
93962004.92

MS
6742463.899
9691060.114

F
0.695740592

Significance F
0.425802804

Coefficients
13728.62199
0.112328728

Standard Error
939.2603999
0.134668856

t Stat
14.61641734
0.834110659

P-value
1.41244E-07
0.425802804

Lower 95%
11603.86736
-0.192313388

Regression
Residual
Total

Intercept
X Variable 1

MEAN OF sensex
13699.67182

MEAN OF FII
-257.7272727

SD of Sensex
2922.670089

SD of FII
6969.829137

COFFICIENT OF VARIATION OF SENSEX


21.33386936

COFFICIENT OF VARIATION OF FII


-2704.342875

Regression Analysis: The significance level is 0.425802804 which is


higher than the alpha value of 0.05. So we can conclude that at a confidence level
of 95 percent the null hypothesis cannot be rejected, and that FII has no impact on
the SENSEX .

Correlation: The R-square value is 0.071757344 .So there is a negligible


correlation between SENSEX and FII.

YEAR 2007
Regression Model 4: Sensex = a+bFII (for the year 2007)
25000
20000
15000
Series1

10000

Series2

5000
0
jan'07 feb

apr

may

jun

jul

aug

sep

oct

nov

dec

-5000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.375969954
R Square
0.141353406
Adjusted R
Square
0.045948229
Standard Error
2546.353022
Observations
11
ANOVA
df
Regression
Residual
Total

SS
1 9606641.041
9 58355223.4
10 67961864.45

Coefficients

Standard

MS
9606641.041
6483913.712

F
1.481611488

t Stat

P-value

Significance F
0.25447517

Lower 95%

Error
Intercept
X Variable 1

15504.54006 937.1439469
0.294602005 0.242029626

MEAN OF SENSEX
16158.66364

16.54445948
1.217214643

4.80294E-08
0.25447517

SD OF SENSEX

CV OF SENSEX

2485.628957

15.38263939

MEAN OF FII

SD OF FII

2220.363636

3172.150182

13384.57317
-0.252907046

CV OF FII
142.8662463

Regression Analysis: The significance level is 0.25447517 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX .
Correlation: The R-square value is 0.14135340. So there is a negligible
correlation between SENSEX and FII.

YEAR 2006
Regression Model 5: Sensex = a+bFII (for the year 2006)

15000

10000
Series1

5000

Series2

0
jan'06

feb

apr

-5000

SUMMARY OUTPUT

may

jun

jul

aug

sep

oct

nov

dec

Regression Statistics
Multiple R
0.359580108
R Square
0.129297854
Adjusted R
Square
0.032553171
Standard Error
1364.872053
Observations
11

ANOVA
df

SS
1 2489706.162
9 16765881.48
10 19255587.65

Regression
Residual
Total

Intercept
X Variable 1

Standard
Coefficients
Error
11551.15861 426.6042334
0.254113983
0.2198095

MEAN OF SENSEX
11681.12636
MEAN OF FII
511.4545455

MS
2489706.162
1862875.72

F
Significance F
1.336485378 0.277420296

t Stat
27.07699011
1.156064608

P-value
6.1914E-10
0.277420296

SD OF SENSEX
1323.067635

CV OF SENSEX
11.32654159

SD OF FII
1872.186634

CV OF FII
366.0514216

Lower 95%
10586.11279
-0.24312965

Regression Analysis: The significance level is 0.277420296 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX .
Correlation: The R-square value is 0.129297854. So there is a negligible
correlation between SENSEX and FII.

YEAR 2005
Regression Model 6: Sensex = a+bFII (for the year 2005)
10000
8000
6000
Sensex

4000

FII

2000
0
apr'05

may

jun

jul

aug

sep

oct

nov

dec

-2000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.49445385
R Square
0.24448461
Adjusted R
Square
0.13655384
Standard Error
958.6809462
Observations
9
ANOVA
Regression
Residual
Total

Intercept
X Variable 1

df
SS
1 2081874.002
7 6433484.096
8 8515358.098
Standard
Coefficients
Error
7454.780317 394.125638
0.506855985 0.336768493

MS
2081874.002
919069.1566

F
2.265198421

Significance F
0.176025491

t Stat
18.91473073
1.505057614

P-value
2.8707E-07
0.176025491

Lower 95%
6522.821276
-0.289474961

MEAN OF SENSEX
7801.976667

SD OF SENSEX

CV OF SENSEX

972.7028836

12.46739032

MEAN OF FII

SD OF FII

CV OF FII

685

948.9020556

138.5258475

Regression Analysis: The significance level is 0.176025491 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX .
Correlation: The R-square value is 0.24448461. So there is a negligible
correlation between SENSEX and FII.

YEAR 2004
Regression Model 7: Sensex = a+bFII (for the year 2004)
7000
6000
5000
4000
Sensex

3000

FII

2000
1000
0
-1000

jan'04

feb

apr

may

jun

jul

aug

sep

oct

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.418527
R Square
0.175165
Adjusted R
Square
0.057331
Standard Error
373.66
Observations
9
ANOVA
df
1
7
8

SS
207553.5
977352.6
1184906

MS
207553.4822
139621.7975

F
1.486540683

Significance F
0.262239304

Coefficients
5199.112
0.114115

Standard Error
178.2767
0.093596

t Stat
29.16315526
1.219237747

P-value
1.43502E-08
0.262239304

Lower 95%
4777.554089
-0.107203304

Regression
Residual
Total

Intercept
X Variable 1

MEAN OF SENSEX

SD OF SENSEX

CV OF SENSEX

5354.625556

362.8446354

6.776284012

MEAN OF FII

SD OF FII

CV OF FII

1362.777778

1330.758495

97.65043993

Regression Analysis: The significance level is 0.262239304 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX .
Correlation: The R-square value is 0.175164503. So there is a negligible
correlation between SENSEX and FII.

YEAR 2003
Regression Model 8: Sensex = a+bFII (for the year 2003)
7000
6000
5000
4000

Series1

3000

Series2

2000
1000
0
-1000

apr'03

may

jun

jul

aug

sep

oct

nov

dec

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.52719538
R Square
0.277934969
Adjusted R
Square
0.174782821
Standard Error
853.0358425
Observations
9
ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

MEAN OF SENSEX

SS
1 1960647.307
7 5093691.04
8 7054338.347

Standard
Coefficients
Error
3972.32749 323.4629397
0.484670764 0.295266628

SD OF SENSEX

MS
1960647.307
727670.1485

F
2.694417672

Significance F
0.144704643

t Stat
12.28062632
1.641468145

P-value
5.4438E-06
0.144704643

Lower 95%
3207.459179
-0.213523865

CV OF SENSEX

4225.433333

MEAN OF FII
522.2222222

885.3334806

SD OF FII
963.0119161

20.95248962

CV OF FII
184.4065371

Regression Analysis: The significance level is 0.144704643 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX.
Correlation: The R-square value is 0.277934969. So there is not such significant
correlation between SENSEX and FII.

REGRESSION & CORRELATION ANALYSIS FOR TWO YEAR


PERIOD

YEAR 2007-08
Regression Model 9: Sensex = a+bFII (for the year 2007-08)
25000
20000
15000
10000
sensex

5000

FII

-5000

feb,08
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
jan'07
feb
apr
may
jun
jul
aug
sep
oct
nov
dec

-10000
-15000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.34656377
R Square
0.12010644

Adjusted R Square
Standard Error
Observations

0.07611177
2930.34103
22

ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

1
20
21

SS
23442423.03
171737970.5
195180393.6

Coefficient
s
14746.8069
0.18583255

Standard Error
634.4249095
0.112470517

MS
F
Significance F
23442423.03 2.730022133 0.114091671
8586898.526

t Stat
P-value
23.24436927 6.01522E-16
1.652277862 0.114091671

MEAN OF SENSEX

SD OF SENSEX

CV OF SENSEX

14929.16773

2978.562753

19.95129807

MEAN OF FII

SD OF FII

CV OF FII

981.3181818

6979.000955

711.1863496

Lower 95%
13423.4197
-0.048776841

Regression Analysis: The significance level is 0.114091671 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX.
Correlation: The R-square value is 0.120106444. So there is not such significant
correlation between SENSEX and FII.

YEAR 2005-06
Regression Model 10: Sensex = a+bFII (for the year 2005 06)
16000
14000
12000
10000
8000
6000

Series2

4000
2000

dec

nov

oct

sep

aug

jul

jun

may

dec

nov

oct

sep

aug

jul

jun

may

apr

apr'05

-4000

feb

-2000

jan'06

-6000

SUMMARY OUTPUT
Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations

0.15281721
0.0233531
-0.0309051
2355.48457
20

ANOVA
Regression
Residual
Total

Intercept
X Variable 1

df
1
18
19

SS
2388031.161
99869536.32
102257567.5

Coefficients
9802.34795
0.22586896

Standard Error
564.4583832
0.344283993

MS
F
Significance F
2388031.161 0.430407134 0.520088132
5548307.573

t Stat
P-value
17.36593564 1.08609E-12
0.656054216 0.520088132

Lower 95%
8616.464896
-0.497444862

MEAN OF SENSEX

SD OF SENSEX

CV OF SENSEX

9935.509

2261.16748

22.7584463

MEAN OF FII

SD OF FII

CV OF FII

589.55

1529.848537

259.4942816

Regression Analysis: The significance level is 0.520088132 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX.
Correlation: The R-square value is 0.0233531. So there is not such significant
correlation between SENSEX and FII.

YEAR 2003-04
Regression Model 11: Sensex = a+bFII (for the year 2003-04)
7000
6000
5000
4000
3000
2000
1000
0
-1000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.5173024
R Square
0.26760178

sensex
FII

Adjusted R Square
Standard Error
Observations

0.22182689
799.874608
18

ANOVA
Regression
Residual
Total

Intercept
X Variable 1

MEAN OF SENSEX
4790.029444

df
1
16
17

SS
3740292.027
10236790.22
13977082.25

MS
F
3740292.027 5.846038762
639799.3888

Significance F
0.027908504

Coefficient
s
4442.21253
0.36903651

Standard Error
237.1459142
0.152629504

t Stat
P-value
18.73198004 2.62052E-12
2.417858301 0.027908504

Lower 95%
3939.485654
0.045476421

SD OF SENSEX

CV OF SENSEX

881.1949667

18.39644154

MEAN OF FII

SD OF FII

CV OF FII

942.5

1235.228105

131.0586849

Regression Analysis: The significance level is 0.027908404 which is less than


the alpha value of 0.05.So we can conclude that at a confidence level of 95 percent
the null hypothesis is to be rejected, and that FII has a significant impact on the
SENSEX.
Correlation: The R-square value is 0.0233531. So there is not strong correlation
between SENSEX and FII.

REGRESSION & CORRELATION ANALYSIS


BETWEEN THE CV OF SENSEX AND CV OF FII (20032008)
The Co-efficient of Variation (CV) measures the volatility. The CV of FII
measures the volatility of the FII whereas the CV of the SENSEX measures the
volatility of the SENSEX.

Regression and CV of SENSEX and FII


YEAR
2008
2007
2006
2005
2004
2003

CV OF
SENSEX
21.33
15.38
11.32
12.46
6.77
20.95

CV OF FII
-2704.34
142.86
366.05
138.52
97.65
184.4

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.562564171
R Square
0.316478446
Adjusted R Square
0.145598058
Standard Error
5.274543682
Observations
6
ANOVA
df
1
4
5

SS
51.52543912
111.2832442
162.8086833

Intercept

Coefficients
13.89943053

Standard
Error
2.232554594

X Variable 1

-0.002711998

0.001992799

Regression
Residual
Total

MS
51.52543912
27.82081105

F
1.852046622

t Stat
6.225796481
1.360899196

P-value
0.003389507
0.245173461

Regression Analysis: The significance level is 0.245173461 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
SENSEX.
Correlation: The R-square value is 0.316478446. So there is not strong correlation
between SENSEX and FII.

NIFTY AND FII


NIFTY: S&P CNX Nifty is a well diversified 50 stock index accounting for 21
sectors of the economy. It is used for a variety of purposes such as benchmarking
fund portfolios, index based derivatives and index funds.
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd.
(IISL), which is a joint venture between NSE and CRISIL. IISL is India's first
specialised company focused upon the index as a core product. IISL has a
Marketing and licensing agreement with Standard & Poor's (S&P), who are world
leaders in index services.
44.89% of the traded value of all stocks on the NSE
about 58.64% of the total market capitalization as on
March 31, 2008.

The NIFTY moves up and down based on movement of 50 companies


share prices listed in NSE sensitivity index.The reasons of the rise and fall of the
Sensex may be due to macro-level or micro-level factors such as Government
policies, Inflation rate, FDI & FII etc.In our research ,we have only considered the
FII factor to find out that is there any impact of the FII on the movement of
NIFTY.So, we have taken the help of the Regression and Correlation tools to
measure it.

REGRESSION & CORRELATION ANALYSIS


BETWEEN NIFTYAND FII
OVERALL (2002-2008):
Data of NIFTY and FII from 2002-08

year
feb,08
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
jan'07
feb
apr
may
jun
jul
aug
sep
oct
nov
dec

FII

NIFTY
-8991
-1643
20238
-1432
-734
-3011
-499
464
-1403
-5250
-574
2385
-2433
1963
1847
3279
4685
-3323
7057
6833
-265
2396

LOG OF NIFTY

5223.5
4734.5
5165.9
4870.1
4040.55
4332.95
4360
3929.12
2885.6
2755.1
2959.55
3745.3
3821.55
4087.9
4295.8
4318.3
4528.85
4464.4
5021.35
5900.65
5762.75
6138.6

8.560922954
8.462631403
8.549834616
8.49086975
8.3041361
8.374003882
8.380227336
8.276170761
7.96748813
7.921209019
7.992792509
8.228257
8.248411378
8.31578667
8.36539308
8.370617085
8.418223323
8.403890106
8.521454101
8.682817793
8.65917007
8.722351982

jan'06
feb
apr
may
jun
jul
aug
sep
oct
nov
dec
apr'05
may
jun
jul
aug
sep
oct
nov
dec
jan'04
feb
apr
may
jun
jul
aug
sep
oct
apr'03
may
jun
jul
aug
sep
oct
nov
dec
Aug,02
Sep
Oct
Nov

1692
685
3276

3001.1
3074.7
3508.1

8.006734167
8.030962615
8.162829859

-3906
-1157

3185.3
3128.2

8.066301755
8.048213038

-595
1212
1064
1703
2159
-507
-299
-470
1313
1746
1204
1035
-469
-17
2122
2390
1421
-350
-503
1288
1645
1139
1008
4227
846
-457
-477
-432
448
411
807
2808
746
-33
-131
-9
-184

3143.2
3413.9
3588.4
3744.1
3954.5
3966.4
1902.5
2087.55
2220.6
2312.3
2384.65
2601.4
2370.95
2652.25
2836.55
1800.3
1779.9
1796.1
1483.6
1505.6
1632.3
1631.75
1745.5
1800.1
934.05
1006.8
1134.15
1185.85
1356.55
1417.1
1555.9
1615.25
1897.75
1010.6
963.15
951.4
1049.7

8.052996668
8.135610612
8.1854617
8.227936547
8.28260945
8.285614161
7.55092409
7.643746409
7.705532709
7.745997979
7.776807642
7.863805041
7.771045998
7.883163615
7.950343804
7.495708597
7.484312462
7.493372927
7.302226846
7.316946769
7.397745342
7.397408338
7.464796327
7.495597498
6.83952997
6.914532263
7.033638751
7.078215096
7.212699991
7.256367809
7.349809435
7.387245022
7.548424253
6.918299493
6.870209163
6.857934584
6.956259688

Dec

53

1093.5

6.99713884

Regression Model 12: NIFTY = a+bFII (for the year 2002 to 2008)
25000
20000
15000
10000
FII

5000

NIFTY

-5000

apr
jul
oct
jan'07
may
aug
nov
feb
jun
sep
dec
jun
sep
dec
apr
jul
oct
jun
sep
dec
Oct

-10000
-15000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.166070585
R Square
0.027579439
Adjusted R Square
0.012144192
Standard Error
1415.34751
Observations
65
ANOVA
df
Regression
Residual
Total

Intercept

1
63
64

SS
3579299.314
126202140.2
129781439.5

Coefficients
2851.214089

Standard Error
179.9537657

MS
F
3579299.314 1.786783
2003208.575

t Stat
15.84414795

P-value
1.18E-23

Significance
F
0.18612593

Lower 95%
2491.605187

X Variable 1

0.068682765

0.051382099

MEAN OF NIFFTY

SD OF NIFFTY

CV OF NIFFTY

132.34375

427.7595418

323.218544

MEAN OF FII

SD OF FII

CV OF FII

3757.466406

684.6983854

18.22234217

1.33670608 0.186126

0.033996167

Regression Analysis: The significance level is 0.18612573 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.027579439. So there is not strong correlation
between NIFTY and FII.

REGRESSION & CORRELATION ANALYSIS BETWEEN


NIFTYAND FII
YEAR 2008
Regression Model 13: NIFTY = a+bFII (for the year 2008)
25000
20000
15000
10000

FII

5000

NIFTY

0
-5000

feb,08 mar apr may jun

-10000
-15000

SUMMARY OUTPUT

jul

aug sep oct nov dec

Regression Statistics
Multiple R
0.271835529
R Square
0.073894555
Adjusted R
Square
-0.02900605
Standard Error
914.679559
Observations
11

ANOVA

Regression
Residual
Total

Intercept
X Variable 1

MEAN OF NIFTY
4114.260909

df
1
9
10

SS
600803.5
7529748
8130552

Coefficients
4122.902787
0.033531096

Standard
Error
275.9747
0.039569

Significance
MS
F
F
600803.5016 0.718115842 0.418726971
836638.6957

t Stat
P-value
14.93942053 1.16845E-07
0.847417159 0.418726971

SD OF NIFTY
859.7331385

Lower 95%
3498.60454
-0.05597926

CV OF NIFTY
20.89641755

MEAN OF IIF

SD OF IIF

CV OF FII

-257.7272727

6969.829137

-2704.342875

Regression Analysis: The significance level is 0.418726971 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.073894555. So there is not strong correlation
between NIFTY and FII.

YEAR 2007

Regression Model 14: NIFTY = a+bFII (for the year 2007)


8000
6000
4000
Series1

2000

Series2

0
jan'07 feb

apr

may

jun

jul

aug

sep

oct

nov

dec

-2000
-4000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.375969954
R Square
0.141353406
Adjusted R
Square
0.045948229
Standard Error
3249.646001
Observations
11
ANOVA
df
Regression
Residual
Total

SS
1 15646112.35
9 95041792.2
10 110687904.5

MS
F
15646112.35 1.481611488
10560199.13

Significance
F
0.25447517

Coefficients
Intercept
X Variable 1

Standard
Error

-5532.7477 6444.470823
0.479811419 0.394188011

Nifty
MEAN
SD
CV

t Stat

P-value
0.858526301 0.412882115
1.217214643

0.25447517

Lower 95%
20111.1535
0.41190381

FII

16158.66364

2220.363636

2485.628957

3172.150182

15.38263939

142.8662463

Regression Analysis: The significance level is 0.25447517 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.141353406. So there is not strong correlation
between NIFTY and FII.

YEAR 2006
Regression Model 15: NIFTY = a+bFII (for the year 2006)

5000
4000
3000
2000

Series3

1000

Series4

0
-1000

jan'06

feb

apr

may

jun

jul

aug

sep

oct

nov

dec

Series1
Series2

-2000
-3000
-4000
-5000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.388493066
R Square
0.150926863
Adjusted R Square
0.04479272
Standard Error
729.5645734
Observations
10
ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

MEAN
SD
CV

1
8
9

SS
756900.6958
4258115.734
5015016.43

Coefficients
4412.500671

Standard
Error
276.7073739

0.082705797

0.069355393

4594.685

2202.8

708.1678071

3326.469173

15.41276077

151.0109485

Significance
MS
F
F
756900.6958 1.422038748 0.267235855
532264.4668

t Stat
15.94645133

P-value
Lower 95%
2.39587E-07 3774.412323
1.192492661 0.267235855 0.077228025

Regression Analysis: The significance level is 0.267236 which is higher than


the alpha value of 0.05. So we can conclude that at a confidence level of 95 percent
the null hypothesis cannot be rejected, and that FII has no impact on the NIFTY.
Correlation: The R-square value is 0.150926863. So there is not strong correlation
between NIFTY and FII.

YEAR 2005
Regression Model 16: NIFTY = a+bFII (for the year 2005)
3500
3000
2500
2000
1500

Series1

1000

Series2

500
0
-500

apr'05

may

jun

jul

-1000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.509265428
R Square
0.259351276
Adjusted R Square
0.153544315
Standard Error
267.2273219

aug

sep

oct

nov

dec

Observations

ANOVA

Regression
Residual
Total

Intercept

df
1
7
8

SS
175039.4211
499873.0911
674912.5122

Coefficients
Standard Error
2273.631894
109.8604694

X Variable 1

0.146968849

0.093872464

MEAN

2374.305556

SD
CV

273.8435304

948.9020556

11.53362632

138.5258475

Significance
MS
F
F
175039.4211 2.451174048 0.161417704
71410.44158

t Stat
20.69563244

P-value
Lower 95%
1.54425E-07 2013.853164
1.565622575 0.161417704 0.075004256

685.00

Regression Analysis: The significance level is 0.161418 which is higher than


the alpha value of 0.05. So we can conclude that at a confidence level of 95 percent
the null hypothesis cannot be rejected, and that FII has no impact on the NIFTY.
Correlation: The R-square value is 0.259351276. So there is not strong correlation
between NIFTY and FII.

YEAR 2004
Regression Model 17: NIFTY = a+bFII (for the year 2004)

5000
4000
3000
Series1

2000

Series2

1000
0
jan'04

feb

apr

may

jun

jul

aug

sep

oct

-1000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.436526419
R Square
0.190555314
Adjusted R Square
0.074920359
Standard Error
122.5597781
Observations
9
ANOVA

Regression
Residual
Total

Intercept
X Variable 1

MEAN
SD
CV

df
1
7
8

SS
24753.00108
105146.2945
129899.2956

Coefficients
1632.422314

Standard
Error
58.47442741

0.03940882

0.030699229

1686.127778
120.1384829
7.12511142

1362.777778
1330.758495
97.65043993

Significance
MS
F
F
24753.00108 1.647904079 0.240101442
15020.89921

t Stat
27.91685847

P-value
Lower 95%
1.94369E-08 1494.152265
1.283707163 0.240101442 0.033183321

Regression Analysis: The significance level is 0.240101 which is higher than


the alpha value of 0.05. So we can conclude that at a confidence level of 95 percent
the null hypothesis cannot be rejected, and that FII has no impact on the NIFTY.
Correlation: The R-square value is 0.190555314. So there is not strong correlation
between NIFTY and FII.

YEAR 2003
Regression Model 18: NIFTY = a+bFII (for the year 2003)
3000
2500
2000
1500
Series1

1000

Series2

500
0
-500

apr'03

may

jun

-1000

SUMMARY OUTPUT
Regression Statistics

jul

aug

sep

oct

nov

dec

Multiple R
R Square
Adjusted R Square
Standard Error
Observations

0.529895014
0.280788725
0.178044258
283.3495135
9

ANOVA

Regression
Residual
Total

Intercept
X Variable 1

2003
MEAN
SD
CV

df
1
7
8

SS
219414.9228
562008.6277
781423.5506

Coefficients
1260.151061
0.162136265

Standard
Error
107.4433946
0.098077538

NIFTY
1344.822222
294.6605487
21.91074358

FII
522.2222222
963.0119161
184.4065371

MS
219414.9228
80286.94682

Significance
F
F
2.73288413 0.142280094

t Stat
P-value
Lower 95%
11.72851125 7.41271E-06 1006.087805
1.653143711 0.142280094 -0.06978026

Regression Analysis: The significance level is 0.142280094 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.280788725. So there is not strong correlation
between NIFTY and FII.

YEAR 2002
Regression Model 19: NIFTY = a+bFII (for the year 2002)

1200
1000
800
600

Series1

400

Series2

200
0
Aug,02

-200

Sep

Oct

Nov

Dec

-400

SUMARRY OUTPUT
Regression Statistics
Multiple R
0.215054448
R Square
0.046248416
Adjusted R Square 0.271668779
Standard Error
66.97676673
Observations
5
ANOVA
df
1
3
4

Regression
Residual
Total

Intercept
X Variable 1

Coefficients
Standard Error t Stat
P-value
Lower 95%
1021.798242
36.76056339
27.79604412 0.0001022 904.8097226
0.133688186
0.350510966
0.381409426 0.7283097 -0.98179414

2002 NIFTY
MEAN
SD
CV

SS
652.5761533
13457.66185
14110.238

Significance
MS
F
F
652.5761533 0.1454731 0.728309653
4485.887282

1013.67
53.12294796
5.240655042

FII
-60.8
85.45501741
-140.5510155

Regression Analysis: The significance level is 0.728309653 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.046248416. So there is negligible correlation
between NIFTY and FII.

REGRESSION & CORRELATION ANALYSIS BETWEEN THE


CV OF NIFTY AND CV OF FII (2002-2008)
REGRESSION OF CV OF NIFTY AND FII
YEAR
CV OF NIFTY
2008
2007
2006
2005
2004
2003
2002

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.410351992
R Square
0.168388757
Adjusted R
Square
0.002066509

CV OF FII
20.89
15.38
15.41
11.53
7.13
21.91
5.24

-2704.34
142.86
151.01
138.53
97.65
184.4
-140.55

Standard Error
Observations

6.369548093
7

ANOVA
df
Regression
Residual
Total

SS
1
5
6

Significance
MS
F
F
41.07522832 41.075228 1.012424728 0.360504852
202.8557145 40.571143
243.9309429

Intercept

Coefficients
13.1786249

Standard Error
2.519777927

X Variable 1

-0.00245941

0.002444272

t Stat
P-value
Lower 95%
5.230074 0.003381526 6.701329534
-1.006193 0.360504852 0.008742612

Regression Analysis: The significance level is 0.360504852 which is higher


than the alpha value of 0.05. So we can conclude that at a confidence level of 95
percent the null hypothesis cannot be rejected, and that FII has no impact on the
NIFTY.
Correlation: The R-square value is 0.168388757. So there is not so correlation
between NIFTY and FII.

CONCLUSION:
As per our research we have found out that in the case of the overall regression
analysis for both the starting year1997 till the year 2008, and the year 2003 to
2004, there is a significant relation between the FII and the SENSEX. Except for
these two cases, all other years for e.g.2003-2008, 2003, 2004, 2005, 2006 etc it
was found that the there is no significant relationship between the FII and the
SENSEX.As the nature of our data is on the monthly basis, so we are not able to

track the significant relation between SENSEX and FII due to lack of availability
of daily data.
As we know the FII is not only the sole factor that influences the SENSEX
movement, the SENSEX is also influenced by Govt. policy, inflation rate, political
environment etc. So, from our research it came out that in almost all the cases there
is no significant relation between the FII flow and the SENSEX movement.

BIBLIOGRAPHY
www.rbi.org.in
www.bseindia.com
www.nseindia.com
www.econstats.com
www.google.co.in
www.wikipedia.org