FIIs are institutions established or incorporated outside India, which proposes to make investment in Indian securities. The Indian economic reforms have led to fast growth in economy, corporate restructuring and improved Forex reserve, making India an attractive destination for investment. Sensex is an "index” of BSE stocks. It gives an idea of the stocks market movement. The Sensex is an indicator of all the major companies of the BSE whereas Nifty is an indicator of all the major companies of the NSE. The present study makes an analyse of trading of FII and stock index during the period June 2000- March 2007 giving emphasis on quarterly data on FII flows and corresponding stock indices such as Sensex and Nifty. Statistical tools like Regression Analysis, CorrelationAnalysis andTrendAnalysis have been used in the study.