FOREIGN PORTFOLIO INVESTMENT (FPI) & ITS EFFECT ON STOCK MARKET CAPITALIZATION

Abstract

This study examines the relationship between Foreign Portfolio Investment and its effect on the stock market capitalization in Pakistan. Using time series data of Pakistan from 2010 to 2024, FPI is taken as a key independent variable along with other macroeconomic indicators such as exchange rate, GDP growth, Trade to GDP, and domestic credit to private sector as control variables to account for broader macroeconomic influences. The analysis investigates the impact of these factors on the stock market capitalization. The results suggests that overall research model is statistically significant and FPI has a positive but statistically insignificant relationship, implying that Pakistan’s stock market is more influenced by structural macroeconomic conditions rather than short term capital inflows like FPI. Statistical tests like regression analysis, correlation and descriptive statistics were performed to determine the effect of independent variables over the stock market capitalization.