In developing countries, like India, there is a great need of foreign capital investment, not only to increase productivity of labor, but also to build foreign exchange reserves to meet trade debit. After the opening the border for capital movement, foreign investment in India has uplifted enormously. International capital markets have undergone tremendous changes since last 2 decades. Several countries, including India, have adopted liberalization and globalization policies dismantling the trade barriers internationally. This transformation made local economies to integrate with the international economy in turn seeking information and their impact on other global markets. To facilitate foreign capital owes developing countries seek to strengthen their capital markets. As a result of which Indian capital markets have achieved new heights and have become more volatile opening the dimensions of new research in the arena of Foreign Institutional Investments and Indian capital market. Foreign portfolio investment (FPI) is diversification of risk globally by purchasing stocks or bonds issued by foreign companies or government. It offers the investors long-term return and diversified risk without the responsibility of management and control. FPI has been confined mainly to the industrial countries. Developing countries have not received much portfolio investment because of impeding restrictions (minimum holding period requirement, discriminatory treatment of foreign investors, foreign exchange controls, underdeveloped secondary markets and higher capital gain taxes etc.) imposed by the host countries. Developing countries face scarcity of capital. Their domestic sources are no longer in a position to meet the huge funds requirements of the industries. After 1990s, most of the developing countries have become keenly interested in attracting investments from industrial countries by opening up their economies for foreign investors.