Impact of Foreign Institutional Investment on Share Price and Market Capitalisation of Indian Pharmaceutical Companies
TL;DR
The findings indicate a positive relationship for Sun Pharma, Dr Reddy’s, Cipla, Lupin, Lupin, Torrent, Zydus, and Aurobindo and significant negative for Divi’s and Glenmark.
Abstract
This paper looks at the effect of Foreign Institutional Investment on the performance of stocks of ten pharmaceutical companies in India. Quarterly data from FY 2020-21 to FY 2025-26 was collected for the companies Sun Pharmaceutical, Dr Reddy’s, Cipla, Divi’s Laboratories, Lupin, Torrent Pharmaceuticals, Zydus Lifescience, Biocon, Aurobindo and Glenmark. Foreign Institutional Investment held as an independent variable, Share price at the end of the quarter and Market Capitalisation were used to measure the performance of stocks. Descriptive statistics and trend analysis were used to study the effects of institution ownership, the increase in shareholder wealth, and the volatility in stock prices. The relationship between Foreign Institutional Investment and market performance indicators was measured using Pearson Correlation. Ordinary Least Squares Regression was used to find out the effect of one percentage point change in Foreign Institutional Investment on Share Price and Market Capitalisation for each company. The findings indicate a positive relationship for Sun Pharma, Dr Reddy’s, Cipla, Lupin, Torrent, Zydus, and Aurobindo and significant negative for Divi’s. Though Biocon and Glenmark do not show any significant relation, Zydus showed the maximum increase in Market Capitalisation and Sun Pharma showed the maximum average Market Value. In conclusion, foreign institutional participation has shown some relation with shareholder wealth for many firms but the nature of that relation varies from firm to firm within the Indian pharmaceutical market.