Emerging equity market in India - Role of foreign institutional investors

In recent years, particularly in developing countries including India, there has been increased liberalisation of domestic financial and capital markets, and an opening up of the market to foreign institutional investors. The main emerging feature of India's equity market is its gradual integration with the global market and its consequent problems due to the hot money movement by Foreign Institutional Investors (FIIs). Therefore, policy measures to 'develop' equity market should aim to encourage small domestic investors to participate in it and counter the tendency of the FIIs to destabilise the emerging equity market.