However, as the effect of economic liberalizations started to take place, the FII investment was very much in term of volume. So, the impact of FII is done directly on BSE. As the increase of FII, the liquidity, interest rate, foreign currency, easy to get capital to company etc. can be maintained. As the foreign entity invests, the Indian player will get the benefits of their expertise in their systematic portfolio investment in different sector.
The same way there are some disadvantages of FII in Indian market that the sudden pull out the Investment can imbalance the economy of India. Second, the rate of inflation can increase. The FII have great influence on market to go up & down due to lot of funds in the countries.
So, the FII & BSE market have a relationship between each other. As a FII have pros & cons as above the strategy of government. •The government should put some restriction limit on withdrawal of funds of FII. •The Banking system should be strengthened. So the abstraction of more FII can be made. •There should apply the effective dispute resolution system by some authority so the trust of fund can be sustained. •The government & respective authority should make people aware about financial market. So, that domestic investment can increased.
It must be noted that FII is integrated with BSE market & influence the Indian stock market.